Extended auto warranty: A different one from Toyota

 Hello All:

Toyota offered my Corolla and extended warranty beyond the usual 3
years/36K miles to  7 years/75K for  $1795.

I knew at the time of the offer that this is quite high but the way
this works is different. If there is no usage of the extended
warranty, then they refund you the money.

The cost of this money to me is the interest minus taxes. At 5%
interest I can get on a CD these days, and a 30% incremental tax rate,
over 7 years I would be loosing 500 bucks. Of  course if there is any
claim, then $1795 is also gone.

I know Toyota's are very reliable, especially within the first 100K
miles.

I reviwed several sources including the archives of the usenet group
and majority says extended warranties are not worth it.

I am inclined to turn this offer down.

What do you folks think?

Deguza

  Kompu Kid wrote:

The real answer depends on the numbers, specifically what repairs you'll
need between years 4 and 7 and between miles 36K and 75K.  It's hard to
know the real numbers.  Toyota obvious estimated them, but I doubt
they'll share the numbers with you.  You can be sure, though, that they
determined it will cost them less than $1795 on the average car;
otherwise, they wouldn't have offered it at that price.

Personally I would turn down the offer.  I had a 1988 Corolla that I
bought with 24K miles on it and kept until it had 175K.  I don't
remember any significant problems happening until around 100K, and
even then the problems weren't major.  The biggest things I had to
worry about were timing belt and brakes.  Would this warranty pay
for the timing belt to be replaced?  Is that due at 75K miles?
That would make it more worth it since that costs several hundred
dollars to have done.

One other factor that might play into this is that they may be
comparing their expected costs versus the $1795 they'll receive
from you.  But their costs aren't necessarily the same as what
your costs would be to have the same repairs done.  Toyota
corporate (assuming they are the ones offering the warranty)
will pay the dealer to do the repair, but they won't pay as
much, probably, as if you paid the dealer to do the same work.
So if you're trying to reason backwards and derive the expected
costs of repairing the car based on Toyota's pricing, that might
be something to take into account.

Finally, if you do decide to take it, is this something whose price
can be negotiated on like the price of the car?  I would guess that
it is.  You might let them know that the warranty would be more
attractive to you if it were, say, $1495 rather than $1795.  If
they are faced between collecting $0 (no extended warranty) and
$1495 (discounted extended warranty), they might choose the latter.
You might even be able to go lower than $1495.

   - Logan

 Kompu Kid wrote:

You're leaving a lot out. I have to assume this is a new car. And we
don't know the terms of the extended warranty - like you didn't say what
is covered. So if your check engine light comes on, and they do a
diagnostic and change an oil filter during the extended warranty period,
you kiss your $1,800.00 good bye? Doesn't sound like a great deal to
me...

Rick

 
When the financial decision is simply not compelling, my view is that
it's best to keep the cash in your pocket. It's a crap shoot for sure,
but why part with your money up front? If you did not trust the car
you should not have purchased it. Any decent car should go 75K without
big repairs. And I bet there are items not covered too. With the
warranty you end up having to argue with the dealer or company whereas
your cash can walk.