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Discussion Starter · #1 ·
Every one of the dozen or more financial gurus I've ever read or heard says it: extended warranties are a bad deal for several reasons, ESPECIALLY from any source other than the auto manufacturer.

1. Anything that costs you real money but costs the dealer under $100 is highly suspicious to begin with. (And there is no such thing as a free extended warranty.)
2. If maintenance insurance policies (they are insurance policies, by definition) didn't make money, they wouldn't sell them. And since they MAKE money, you LOSE it.
3. Maintentance policies exclude so many parts they often pay little to nothing, and most non-manufacturer extended warranties go belly up long before you need them.
4. One exception: If replacing a transmission would be financially impossible for you, and the vehicle is critical to you, then forget the fact that it's a bad financial deal and chalk the expense up to the cost of doing business.
5. Some gurus add that if a buyer can't afford to replace a tranny, maybe he should buy a cheaper vehicle and put the difference in, say, A REPAIR FUND.
6. Which brings up their bottom line: put the cost of the extended warranty into a repair fund. Over the years you WILL come out way ahead (See #2).

Now, rather than argue with me, just read the financial books and Google the internet (but NOT sites that sell extended warranties). They will make it clear that extended warranties are just another form of the lottery, and we KNOW the house always wins over the long term.

I repeat: If the ext warr sellers didn't come out ahead, THEY WOULD NOT SELL THEM. And if they come out ahead, YOU COME OUT BEHIND.
 

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Extended warranties are just like life insurance or medical insurance....It's a big cost for nothing until you need it and then you're very happy that you have it.
 

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Most of what you said is true when you look at the averages.

The way I look at it is, I am not average when it comes to my cars.
If I hear cluncks, or rattles, or if my tranny feels funny, Im gonna bring it in to have it looked at/repaired. This costs $$ every time.
Now the "average" person is going to bring there car in when it doesn't move, they ignore clunks an other itmes until they break, which may or not be over the warranty.

Also I bougt a honda 120K Mile/ 8 year policy for about $1250.

When I sell the ody in 5-6 years it will still have a honda warrany.. I am pretty sure I will get at least a good chunk of that back selling to a private party.. plus the van will sell quicker.

I thought it was worth it to me, one 3K transmission and I would wish I would have bought it if I didn't
 

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IGotMine said:

4. One exception: If replacing a transmission would be financially impossible for you, and the vehicle is critical to you, then forget the fact that it's a bad financial deal and chalk the expense up to the cost of doing business.
5. Some gurus add that if a buyer can't afford to replace a tranny, maybe he should buy a cheaper vehicle and put the difference in, say, A REPAIR FUND.
6. Which brings up their bottom line: put the cost of the extended warranty into a repair fund. Over the years you WILL come out way ahead (See #2).
I repeat: If the ext warr sellers didn't come out ahead, THEY WOULD NOT SELL THEM. And if they come out ahead, YOU COME OUT BEHIND.
I definitely agree with item #4, my personal income is in the top 5-10% of americans, yet a $3000 repair would be something I would mildly consider to be a "financial hardship." For this reason alone, if I keep the vehicle beyond the initial 36 mo/36,000 mi period, I will definitely invest in a Hondacare contract.

Bullet #5 makes total sense, but unfortunately it is one of those statements that is easier said than done.

Bullet #6 makes sense also, but again something that is often suggested but rarely practiced!

And finally, the last statement about the Ext Warr seller coming out ahead, and the buyer coming out behind, that is subject to interpretation. IMHO, a Hondacare coverage can be perceived as a WIN/WIN in many instances. The seller makes a profit sure, but that does not mean that the buyer is at a loss. IF I spend $1250 for a contract and only have 60-80% of that paid out in claims then it only cost me between $250-$500 to know that Honda will cover stated components up to 8 years or 120,000 miles. Not a bad deal IMHO....

But, to each his own. The Hondacare coverage may not be for everyone, I understand that completely!
 

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I never buy them, because i agree with all that you said...

However, I did buy one on this van for the fact that it is a Honda with a V6....and Honda can not seem to get the Tranny right.

I like the 24 hr road side for my wife and kids.......Plus it was very cheap.

If Ihad to pay what people are paying now..not a chance in hell
 

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When I bought the ody, there was NO WAY I would not get the extended warranty. Like was mentioned earlier, its just like insurance and seems expensive until you need it. Especially with the reputation these vans have for transmissions going bad.
 

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I just it's one of those things you decide whether or not to take a chance on.
I purchased a Pontiac Bonneville used, and put an extended warranty on it, all it ever needed was an alternator, warranty $1500.
I purchased a Nissan Maxima SE new and they are suppose to be an outstanding long lasting car, but I purchased the extended warranty again this time only $1200. At 72,000 km or 45,000 miles the tranny went, I let them know it was slipping and they said just drive it until the next oil change. They ended up having to put a new tranny, rad and lines in it. cost $4200 covered.
At 82,000 km or 51,000 miles the equivlent of the mass air flow went. $2100 covered. At 87,000 km the oxygen sensor went, $400 covered.
Sometimes you win sometimes you loose, for my piece of mind I buy the extended, Honda under $1000. It is worth it to me.
 

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pianomusic said:
When I bought the ody, there was NO WAY I would not get the extended warranty. Like was mentioned earlier, its just like insurance and seems expensive until you need it. Especially with the reputation these vans have for transmissions going bad.

I agree extended warranties especially on Toyotas and Hondas are usually a waste of money. There could be a rare exception where they would pay for themselves but I'd rather keep the money in my pocket rather than give it to the dealer.
 

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Extended warranty gets bad press because of some 'overpriced" plans sold in bestbuy/sam'sclub/circuit city. You know, a $79.99 four-year plan on a $399 TV. Compared to the cost of the van, HondaCare is quite affordable (mine was $760 for 7/75K on a 25K van). So the plan costs about 3% of the total cost and it is a good deal.

I mean, If the four-year warranty addition on the 32" TV had only costed about $12 (3%), I might have bought it as well.
 

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This is the 1st car that I have purchased an extemded warranty on. I paid $1,200 for the 7/100K, $0 deductible warranty (later learned cost was only $1,050). My logic: VCM, Navigation, back-up camera, navigation system/DVD, DVD RES and LCD screen, RES remote control, etc. and I figured that, at about 3% of the vehicle cost, it was a worthwhile investment. Had I purchased an EX or lower, I would have probably passed.
 

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Non-Ody, but still Honda....

When I went to but my 06 Accord last Friday, I was not planning on buying an extended warranty, especially now that the new 06's have a 5 year/60,000 mile powertrain warranty. However, I was able to negotiate the 7 year/80,000 mile HondaCare warranty for only $595 plus I made them throw in 5 oil filters... ;) The price alone was worth it to me for a $20,000+ car, especially when people spend $500 on extended warrantys on their $3000 TV's...:cool:
 

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IGotMine said:
Every one of the dozen or more financial gurus I've ever read or heard says it: extended warranties are a bad deal for several reasons, ESPECIALLY from any source other than the auto manufacturer.
Did you consult any of them personally or is this general advice based on averages?

Even a "Guru" like Consumer Reports admits (based on reliability histories overlooked by other "gurus") that extended warranties may be a good idea on some products like notebook computers, some large screen televisions and certain excercise equipment. That kind of repair cost vs. reliability risk is something most other "Gurus" neglect to consider when they spew their generic advice.

According to CR's generic advice, "At some point in the buying process, the dealership’s financing manager will try to sell you an extended warranty, which can cost hundreds of dollars. Consumer Reports does not recommend buying an extended warranty unless you plan on keeping a trouble-prone vehicle for an extended time after the original warranty runs out. Most manufacturer warranties are sufficient, with bumper-to-bumper coverage of at least three years or 36,000 miles and powertrain coverage that’s often longer. If you want an extended warranty, ones offered by the auto manufacturer are typically better than those offered by third-party companies. "

1. Anything that costs you real money but costs the dealer under $100 is highly suspicious to begin with. (And there is no such thing as a free extended warranty.)
Dealers pay quite a bit more than $100 for most OEM warranties. Still, they usually sell them for double what they pay, or more. Some sell for very little over their cost and make money in volume. They have little financial risk because the repairs are at a contracted rate, reimbursed by the manufacturer.

2. If maintenance insurance policies (they are insurance policies, by definition) didn't make money, they wouldn't sell them. And since they MAKE money, you LOSE it.
You could say this about any product or insurance, but it isn't always true. Most major airlines don't make money, yet they still sell seats on airplanes. It all depends on the price you pay compared to the risk involved. If the actuaries have done a good job, they will make money on average but certainly not in all cases. Actuaries are wrong, sometimes.


3. Maintentance policies exclude so many parts they often pay little to nothing, and most non-manufacturer extended warranties go belly up long before you need them.
Let the buyer beware. Research anything before you buy. Check the exclusions and inclusions yourself. Many OEM policies do cover the most expensive repairs, though most also exclude wear items.

4. One exception: If replacing a transmission would be financially impossible for you, and the vehicle is critical to you, then forget the fact that it's a bad financial deal and chalk the expense up to the cost of doing business.
Extended warranties can also be financed and provide peace of mind. This may be a factor for some.

5. Some gurus add that if a buyer can't afford to replace a tranny, maybe he should buy a cheaper vehicle and put the difference in, say, A REPAIR FUND.
In many cases, a buyer would come out ahead with a repair fund earning interest. Even so, that cheaper vehicle may not accomodate the whole family, may not be as safe, may not have other features important to the buyer. "Gurus" talk in generalities. That makes advice from many of them very questionable.

6. Which brings up their bottom line: put the cost of the extended warranty into a repair fund. Over the years you WILL come out way ahead (See #2).
That depends on how much you paid and how reliable the vehicle is. Say buyer A paid full retail for a plan on a 2006 base Odyssey LX that has the improved 5/60 powertrain warranty standard. It's pretty likely they won't recoup their investment, but it is possible. Even worse is when this buyer trades in their vehicle after only a few years.

Buyer B bought a plan for their 2005 Touring R+N and paid less than half of retail for the extended warranty, a price reported by many on this forum. With the first year model, 3/36 warranty, and extra gizmos like power doors, power hatch, RES, NAV, VCM, etc, there's a lot more that can go wrong and will cost a lot to be repaired. This buyer is far more likely to break even or come out ahead, especially if they keep the vehicle for the full term. If they sell near the end of the term, that transferable warranty might add a little value to a buyer- at the very least it's a great selling point when people compare your vehicle to another used model with no warranty.

The "gurus" would give generic advice and say both wasted their money. That might be true, but knowing more than the gurus in this case, I would claim that buyer B is a lot closer to even-money and maybe even have the odds a bit in their favor if they got a great deal on the warranty plan.

Also, consider that OEM extended warranties from companies like Honda and Toyota include roadside assistance and other benefits that aren't included in the standard warranty. These benefits can cost up to $50 a year if you buy them in the form of a AAA membership. That's added value, also.

Now, rather than argue with me, just read the financial books and Google the internet (but NOT sites that sell extended warranties). They will make it clear that extended warranties are just another form of the lottery, and we KNOW the house always wins over the long term.
Those who believe everything they read are as foolish as those who buy an extended warranty without careful consideration. A fool and their money, as they say. These gurus give advice that is fine in general, for the average person, and is probably accurate most of the time. On the other hand, they simply cannot know the specific details for any person and cannot always provide the best advice in any particular case unless they consult with you personally. I would hope any guru of any merit would admit this, and probably does in the fine print.

Yes, even in Vegas, the house usually comes out ahead on average. Buy you can make the odds almost even if you play the game wisely. The smart gambler plays at nearly even odds while the typical gamblers send profits to the house. Even the typical gambler is having fun, so that profit sent to the house did provide some value.

Similarly, the smart buyer of any product or insurance usually has their savings subsidized by the typical shopper that puts no thought into the purchase. Again, like fun for the gambler, peace of mind provides some value even to the typical shopper who won't recoup their investment. The buyer who didn't even consider insurance could come out the worst of all, perhaps because they took on faith some general advice (that didn't really apply to them) written by a random financial guru.

I repeat: If the ext warr sellers didn't come out ahead, THEY WOULD NOT SELL THEM. And if they come out ahead, YOU COME OUT BEHIND.
Completely false and misleading. Many companies are not profitable, yet they keep selling their products. Many insurance companies won't be profitable after their losses in hurricanes this year, yet they still sell policies. Sometimes, the actuaries are wrong. Sometimes, the savvy consumer can recognize a low cost vs. high risk and make a good judgement and beat the actuaries, too.

You have also failed to consider the cases where all parties come out ahead. Yes, this is possible with an extended warranty plan. Manfucturers pay contract amounts for many warranty repairs, usually less than the full retail parts cost and labor rates approaching $100/hr that a customer might pay on their own for out-of-warranty work.

As with any insurance policy, the key is how much you paid compared to the risk involved. As I said in the other thread, ( http://www.odyclub.com/forums/showthread.php?s=&threadid=28028 ), that owner of a 2005 Odyssey is likely to have about 4 "serious" problems in years 4 through 7, according to Consumer Reports ( http://www.odyclub.com/forums/showthread.php?s=&threadid=28567 ). That would be over 5 out-of-warranty problems if you consider year 8. Even one RES repair could cover the roughly $1100 to $1250 cost of a 7/100 or 8/120 plan. I've now armed you with a lot more information than any "Guru" considers when giving financial advice on this specific case. I claim you can make a better decision based on your situation than these "gurus". You may still find the warranty is a bad deal for you, but at least you didn't blindly take some "gurus" word for it.

I'm not saying extended warranties are a good idea or a bad idea. More often than not, many types of extended warranties on most products aren't favorable to the consumer. What I am saying is that it all depends on the warranty coverage, the price you pay and the possible risk/reliability involved. Unless some guru is helping you personally, do the numbers on your own and make up your own mind. If factors like financing and peace of mind are involved, consider those, too. What is a bad idea is believing blanket statements like "Extended Warranties Bad Deal Financially," without putting any thought into the issue for your own financial case.
 

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Discussion Starter · #13 ·
Justice said:
So the plan costs about 3% of the total cost and it is a good deal.
That's just it. It is NOT a good deal, fiscally. If it were a good deal for buyers, sellers would go broke.

The only counterargument is the OdessyFamily's (and others') observation that the spread between list and wholesale repair prices MAY make an ext war a win/win situation IF the car is bad AND the buyer got a truly special price. The odds against those events are stacked in the seller's favor, just as they are in any casino. And, of course, the ext war sellers know all about the tranny problems and price their warranties accordingly.
 

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IGotMine said:
Every one of the dozen or more financial gurus I've ever read or heard says it: extended warranties are a bad deal for several reasons, ESPECIALLY from any source other than the auto manufacturer.
I understand the financial argument against the warranty. However, I think the buyer also has to consider their own situation to judge how likely they are to see a benefit.

Your single vehicle is an individual case. Statistics about average repair costs don't mean that much because your vehicle may be better or worse than average.

If the warranty is a decent plan (like Hondacare) then extended warranty might make sense if:

(1) You will keep the car for the entire 7 yr/100k mile coverage.

Even with a good car, you'll almost certainly have at least a couple of normal minor repairs in seven years. Plus, parts and service will be more expensive 7 years from now. If you have any covered repairs, then your loss will likely be down to a few hundred bucks at worst. If you have one major repair, like a transmission, then you'll come out ahead.

Age takes its toll on components and short trips are usually tougher on a vehicle than long ones. If you are driving 15k or less per year around town, you'll be able to get the full seven years before you hit the mileage cap. I think that increases the chance that you'll see a decent return on the extended warranty.

(2) You may sell the vehicle privately while the extended warranty is still in effect.

In that case, having a transferrable warranty may give you and a potential buyer some peace of mind. If you sell the vehicle in good faith and the transmission craps out a week after the new buyer drives away, then you are both protected.

This may give you a little extra bargaining power to get a higher price for your car. Even if you get $500 more, then that is 40-50% of the original warranty cost back in your pocket.

By the way... I've never bought an extended warranty on any car I've owned. However, I probably will buy one when we buy our Ody.
 

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I never by extended..but i did for this van for one reason..I do not trust it..It is the largest piece of crap I have ever owned. I now have peace of mind to go with my piece of crap
 

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(And there is no such thing as a free extended warranty.)
So the FREE 7 year/100K mile extended drivetrain warranty is a figment of my imagination?

It IS aftermarket, and there is a deductible, but it is "free"
 

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Oily Pablo said:
So the FREE 7 year/100K mile extended drivetrain warranty is a figment of my imagination?

It IS aftermarket, and there is a deductible, but it is "free"
The warranty cost the dealer money, so it isn't free. One way or another, it was included in the price you paid for the vehicle.
 

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I understand that, but still the cost to me is free. If two dealers are the same in all ways, and two exact cars have the same lowest price, I'll go for the guy offering the free extended warranty.

As for the quality of this "free" warranty - that is a different story.
 

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Just purchased a new ODY and well I got an new HONDA CARE contract.. Still had 3 years left on the last one which I will get a refund for. If Im going to pay $30K+ you bet Im going to get HONDA CARE....:)
 

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I'll be getting a ext. warranty for our new Ody. I figure a hundred-odd dollars a year is pretty inexpensive peace-of-mind.
 
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