Extended Warranty on my Jeep?

[Jumbo82]

I have a 2005 Jeep Liberty Renegade with 77,000 miles on it. I bought it used in 2006 with roughly 29,000 miles. The car came with a 36,000 mile warranty, so I opted to purchase the 85,000 mile extended warranty. The warranty came in handy last month when I had my Jeep in the shop for a week getting work done on the pistons, but so far I haven't had enough work done on it to justify the cost of the warranty.

Last Friday I received a call from Warranty Financial Services offering me an additional 5yr/100,000 mile warranty for $2,335. I'd be covered until I hit 177,000 miles, assuming I kept the vehicle that long. If I canceled before then, I'd be reimbursed for the portion of the warranty I hadn't used, but they wouldn't give me the formula they use to calculate it (if I put 20,000 miles on in a year, thats 1/5 of the warranty, but they said I'd likely get back more than half of the total warranty cost, but not 4/5). The KellyBlueBook trade-in value of my Jeep is about $7,500.

I personally am not a fan of insurance in general. All insurance companies calculate how much they think they will pay out to you (statisticially), then charge a premium greater than this. Thats how they stay in business, obviously. With warranties, same deal. If they are charging me $2,335, then they must figure that I'm likely to spend less than this over the life of the warranty. Sure, my engine or transmission could go and the repairs would be well above the cost of the warranty, but they know that statistically thats not very likely or they would be charging even more for the warranty.

I understand that with warranties and insurance you are buying "peace of mind." Health insurance makes sense because if you get into a major accident the bills could get into the tens or even hundreds of thousands of dollars. That could bankrupt someone. But without a warranty, the worst case is I'm out several thousand dollars and/or have to buy another vehicle. It would suck, but life goes on.

Heres my dilemma. I could get the warranty and keep the Jeep for several more years. I could not get the warranty and keep the Jeep for several more years. Or I could not get the warranty, trade the Jeep in, and buy another vehicle with fewer miles that is still under warranty, putting that $2,335 "I saved" towards the newer vehicle. I have until the end of the month to decide if I want the warranty and then I am no longer eligible. Anybody have any advice for me besides relax and drink a homebrew?

 

[somecallmetim]

It sounds like you know what the game is. IMHO warrrantys can be a good thing if you owe money on the car & might find yourself in a tight spot if something goes wrong. If its paid off, or close to it, I would save the money.

 

[beala]

As somecallmetim said, it seems like you've done a lot of thinking about this already. I'm not sure what else can be said. As you've pointed out, on average, across many customers, the insurance company is going to win the gamble, otherwise they wouldn't be in business, but this doesn't mean it can't be good for you, as an individual. I think what it comes down to is how reliable you think you're car to be. Has it run well in the past? Any chronic problems with it? If so, I'd say go ahead and buy the warranty. That is, if you believe your car will need more repairs than the average Jeep, the warranty will benefit you. You also may want to consider what you use it for. If you off road and put a lot of stress on the car (more stress than the average jeep), the warranty might be worth it. Also, I wonder if it's possible to have your car inspected by a shop before you buy the insurance, so you can get a feel for what kind of shape it's in, and then make the decision based on that.

 

[kornkob]

You should consider getting a subscription to consumer reports and read what they have to say about extended warrantees.



I think you should take the money you'd spend on a warranty and put it in a high yeild savings account. If nothing bad happens, you get money plus interest. Otherwise use the savigns to cover the issue.

 

[Jumbo82]

I forgot to check back with this thread until today, woops. Thanks for all the input everyone. I got a packet in the mail a couple days ago that explained the benefits of the warranty package. I decided that it wasn't worth it. The warranty covers up to $5000 in repairs, with caps at $3000 for engine work, $2000 for transmission repairs, etc. So even if my transmission went I'd still be at least $435 better off without the warranty ($335 plus $100 deductible, plus any interest I would have accrured by keep the money in a savings account). If the engine sh.its the bed, then I'm really only out an additional $500 or so. A risk I'm willing to take. After all that, now I can finally rest easy.