Quote:
Originally Posted by monkeyman
Do you track the dollar amount of warranties that go unused as well?
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If you buy a car and keep the car to full term of the extension, you will on average beat the house 1.5/1. For every thousand you spend, you will typically get 1500 in claims. Most people buy a car with the intention to 'drive it into the ground'. The reality is, most people trade out at around 4 years.
Where the warranty provider wins, is on attrition. Trade-ins, write offs, and private sales where the warranty transfer doesn't take place. But the fact that manufacturers make money on OEM extended warranty plans is actually a myth. The net goal is zero. The try and break even every year on their fund. They are viewed as a retention tool. As a guy who gets a $15,000 Cummings Diesel engine replaced at no cost, is very likely to believe in the brand, and buy another vehicle. With the new AIC rules in Alberta allowing cancellation at any time for a pro-data refund, it has driven the costs up somewhat, as attrition can't be banked on anymore.
Third party plans, that's a different story. But I have only ever sold those when no other option was available.