I am pretty busy today, but I will drop some semi-pro advice.
If it is a manufacturers endorsed warranty, I would have no issues with it.
If it is a third party plan, I would do my homework on the provider, there are some pretty sketchy plans on the market. Instead of telling you who is bad, I will tell you who you can trust IMHO. First Canadian, and Secure Drive are the two I would certainly recommend. Secure drive especially because they are actually the administrator for a lot of manufacturers program. But always, ask for the manufacturers backed plan first and foremost, even if it costs more. If you have a dispute, you can go right to the manufacturer for assistance. That option does not exist with 3rd party.
As far as refund on warranties (Claims free reward in the industry term), I tell my customers not to use that as a motivating factor in making their decision. Because yes, you could make more money of you simply invested the funds over a long term because you are only getting a portion of it back. You buy an extended warranty is you are unsure if you can fork over 8 grand for an engine. It is a nice bonus, but that is all it is, a bonus. The attrition rate is about 95% meaning most people either sell the car, trade the car, or make a claim. If any of the three happen before the term is up, you forfeit the refund. And it is term, not miles the refund is determined by. So even if you burn through your allowable km's a year early, you still need to wait out the term and still own the car to get the refund.
The majority of the warranties we sell are to people with lower income, and they blend it into their financing because $40/mth is better than $4000 in one hit. Wealthy people, more or less just self insure.
In conclusion, I have never seen a horror story when someone has bought a warranty. I have seen 20,000 engine replacements done on TDI Touaregs. I also had a BMW M3 get basically an entire power train with a third party supplier when a clutch detonated and ended up blowing the engine. He just has to weigh out if he wants to pay now, or pay later, and take the risk of paying way more later.
The last thing to bear in mind, extended plans have a huge value if you sell the car used. They are not transferable if you trade it, so they have little value to a dealer, but on the private market, the rule of thumb is each year of coverage, is worth +/- $1200.
Hope this helps.
So without knowing your buddies exact financial situation / motivating factors / make model year of car, I would have to make my vote:
Unless of course he is dealing with our dealership... then he should buy the warranty.
Never bought one and generally the fancier the insurance is, the worse off it is for the customer in general. Unless you have the worse of luck and require a very expensive fix to your car, it won't work out for you.
If you buy a car, you'll incur cost fixing it whether you pay it in the form of insurance premium or out of pocket expense. This type of insurance preys on the fear some people have of repairing their car. But there's no two ways about it that if you buy a car, it'll cost you to maintain it. If a, for example, $4K fix won't cripple your finance, don't buy it.
Last edited by darklord700; 01-08-2014 at 10:03 AM.
The dealership is betting the car they're selling you won't breakdown - that's how they make money on the warranty. If you take the insurance, you're betting it will breakdown. They're the experts with tons of similar deals to draw experience from and they're confident enough in the quality of the car to make this bet with you, so why aren't you? They know this bet pays off in their favour way more often than it benefits the customer... that says everything you need to know.
If you're not confident in the quality of the car, you probably should have bought a different car.
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So you're worried about the quality of the tech stuff... you're still worried about quality. It's still the same bet regardless of whether we're talking about engine quality, powertrain quality, or "tech stuff" quality. You're betting against the quality of the car you're spending thousands of dollars on and the dealer is confident enough in their product to bet it won't have a problem.
Again, if you're so sure the quality of the car is bad enough to warrant placing a bet costing thousands of dollars, why did you get this car? If you're so hell bent on placing bets worth thousands of dollars on a sucker bet, you'll seriously find better odds at the casino.
cral12 - I know 5 people who have only bought Acuras all their lives. None of them have ever had any problems with any of their vehicles. They do get regular maintenance done - oil changes every 8,000km, regular checkups as prescribed by Acura. But not one issue. I am willing to bet that unless this car is a complete lemon, you wont have any issues with it. Just take care of it (ie. regular maintenance) and you likely will be fine.
As someone else pointed out - dealers wouldn't sell them if they weren't profitable.
In all my experiences with vehicles, extended warranties aren't worth it most of the time
