What will I lose at 50,000 miles when warranty expires?

[M3BlueGeorgia]

Also don't buy insurance for your car or home- or health insurance or life insurance either... statistically you will lose money buying them...otherwise they wouldn't be selling them.


Seriously though- that's exactly what an extended warranty is. It's an insurance policy.

You are paying a fee (the margin on the policy) in order to manage your risk and have known, fixed, costs for some period of time.


Obviously it's up to each person to decide if that fee is worth paying- and it's good to recognize there IS one... but the blanket suggestion "They're only selling it to make money so don't buy it" is....pretty silly.

The decision to buy insurance and extended warranties involves some risk/cost analysis.

For house insurance, the risk of loss is low but the impact of a loss-event can be financially catastrophic therefore it makes sense (which is why your mortgage company requires it).
Same for health insurance.

Extended warranties fall into a different category, and most are not worth the expenses because the repair vs replace decision of a four year old appliance doesn't support it unless you have an insanely expensive or unreliable appliance. Sometimes it can make sense for bleeding edge technology.

For vehicles, I can see for Model S & X sold in the earlier days of Tesla that an extended warranty was critical for owners, using the bleeding edge technology exception. But I'm not convinced of the financial benefits of an extended warranty for Model 3 or Y, and even modern S&X have much less justification for it than those built 4 to 8 years ago.

 

[Kirby64]

Also don't buy insurance for your car or home- or health insurance or life insurance either... statistically you will lose money buying them...otherwise they wouldn't be selling them.


Seriously though- that's exactly what an extended warranty is. It's an insurance policy.

You are paying a fee (the margin on the policy) in order to manage your risk and have known, fixed, costs for some period of time.


Obviously it's up to each person to decide if that fee is worth paying- and it's good to recognize there IS one... but the blanket suggestion "They're only selling it to make money so don't buy it" is....pretty silly.

Car, home, health, and life insurance are all much much different situations though. You're buying policies in many cases where if you had to pay out of pocket, the cost would bankrupt you. Auto insurance can easily cover bills that are on the order of $100k+. There's a hard upper limit on how much a warranty could return, realistically.

Plus, insurance is usually paid monthly, whereas extended warranties are usually lump sums paid up front. If we all had to prepay insurance for the next 5 years, you'd be damn sure the rates of people getting premium/higher-end coverage would be WAY lower.

Extended warranty companies are banking on the fact that any number of things will give them the ability to not pay out: you sell the car, the car gets in an accident (so insurance covers it), etc etc.

The insurance industry has pretty thin margins for premiums taken in vs. cost of premiums. I'd be VERY interested to see how the extended warranty margins compare. My guess is they're ridiculous in comparison. That's the reason why people don't recommend them.

It's just like buying whole life insurance, or an annuity... it's not that they don't potentially have places for use, but there's a LOT of downsides to them so they aren't useful for the vast majority of consumers.

 

[Knightshade]

There's a hard upper limit on how much a warranty could return, realistically.

Sure but that limit is still way higher than cost of warranty. You're unlikely to exceed it (or they wouldn't sell it) but it locks in a fixed cost versus risk of higher costs. That's the point of ANY insurance.

Plus, insurance is usually paid monthly, whereas extended warranties are usually lump sums paid up front.

Dunno about you... my homeowners is paid once a year not monthly... car insurance is twice a year.

Also- the cost of the extended warranty on my Model 3 was pretty comparable to my single-year homeowners insurance payment... so this doesn't seem like much of an objection really.

The insurance industry has pretty thin margins for premiums taken in vs. cost of premiums. I'd be VERY interested to see how the extended warranty margins compare.

Me too.

I know the one previous one I ever had though (car warranty) more than paid for itself- and that was the most reliable brand of car that exists (Lexus- though in fairness I got the warranty for only $100 over dealer cost so there was very little margin on it- no idea what the margin is on the Tesla warranties (or the Xcare one)

On the tesla- to my mind the policy was roughly about what I'd expect two average repairs to cost.

I might need 0 over the extra 6 years I'm covered- my loss that.... but I've never had a car go 10 years without needing ANY repairs- not even a Lexus- so seems unlikely.

I might need 1, and thus I "paid" about 75 cents a day for those 6 years for some extra piece of mind. Seemed a reasonable cost.

I might need 2, and break even. A push is fine by me.

Or I might need more than 2 and come out ahead... my gain.



Obviously the Xcare folks hope for situations 1 or 2... and honestly since the $ is spent, I do too.

Since it'll mean I spent less time getting my car fixed, and feel better about the folks whom I've recommended the car to and especially those who have bought one based on that.[/QUOTE]

 

[Fresnel]

I've never gotten an extended car warranty on any other car I've owned. (all non teslas). But, I have to admit.. given how expensive it is to fix teslas and the questionable reliability long term (based peoples random problems, no stats sadly) I would deff think about getting an extended warranty.

 

[TheOtherPete]

I think the general rule of thumb is don't get warranties for things that you can reasonably afford to self-insure.

 

[vickh]

The decision to buy insurance and extended warranties involves some risk/cost analysis.

For house insurance, the risk of loss is low but the impact of a loss-event can be financially catastrophic therefore it makes sense (which is why your mortgage company requires it).
Same for health insurance.

Extended warranties fall into a different category, and most are not worth the expenses because the repair vs replace decision of a four year old appliance doesn't support it unless you have an insanely expensive or unreliable appliance. Sometimes it can make sense for bleeding edge technology.

For vehicles, I can see for Model S & X sold in the earlier days of Tesla that an extended warranty was critical for owners, using the bleeding edge technology exception. But I'm not convinced of the financial benefits of an extended warranty for Model 3 or Y, and even modern S&X have much less justification for it than those built 4 to 8 years ago.

I agree about the old S/X comment. I will revisit this issue in 3 years when there is more data on the 3 and the warranty expires. Unfortunately, OP doesn't have that luxury...

Have never bought an extended . warranty Q; is cani buy it at anytime? what's the typical wait period for a claim?

 

[trm2]

If we all had to prepay insurance for the next 5 years, you'd be damn sure the rates of people getting premium/higher-end coverage would be WAY lower

Quite the opposite. If an insurance company couldn’t adjust prices for 5 years, premiums would skyrocket (except life insurance which is priced for a longer term already). Car insurance is typically a 6 month term because insurance companies need to have the flexibility. Home insurance at a year policy for much the same reason.

 

[Kirby64]

Quite the opposite. If an insurance company couldn’t adjust prices for 5 years, premiums would skyrocket (except life insurance which is priced for a longer term already). Car insurance is typically a 6 month term because insurance companies need to have the flexibility. Home insurance at a year policy for much the same reason.

Sure, if rates had to be locked in for 5 year periods then yes... but I'm sure in the theoretical world where you had to prepay 5 years of premiums, there would also be ways for policy makers to make you pay more. For example, if you got a ticket... woops you better add another $500 to your policy sir.

 

[OCR1]

We seem to be having a lot of theoretical discussions here without looking at actual numbers. You can’t determine if an extended warranty is a good deal or not until you actually look at the price of the warranty and compare it to the potential cost of self insuring any repairs.

If someone offered you an extended warranty on the Model 3 which covered you for four additional years and only cost $1,000 I suspect most people would sign up for it. At $10,000 nobody would sign up for it. Somewhere between those two numbers is where the insurance companies will find the right balance between choosing a price that can make a profit for them without being so high that nobody would want it.

From what I recall when I got a quote from Xcare it was not all that unreasonable, but not so great that I was ready to lock it in. I’ll take another look as I get closer to the end of the current warranty. If technology advances significantly I may just end up trading in the car for something new. If not, I may consider buying the coverage. Or maybe another company will come along and create some competition to lower prices.

 

[SageBrush]

Extended warranties vary significantly. However, on expensive cars they can pay off.

Skip the warranty and go to the casino instead. Slightly more interesting experience, and you win ... sometimes

 

[SageBrush]

which is why your mortgage company requires it)

No ...
The lender requires it because their rates do not include taking on any risk of house damage