Why NOT to Buy that Extended Warranty?

I just bought my Clarity Wednesday. The dealer quoted me $2500 for the 7/70,000 Ultra warranty through MasterTech. This is my first Honda so I know nothing about Honda Care, or these 3rd party warranties for that matter. I know it was a hard sell by the dealer. I'm really on the fence about this so I appreciate the thread. I'm wondering where this $1300 warranty is hiding and what it covers!

 

Check out Hyannis Honda on the web. Your dealer should match it. If they won’t you can just order it on line.

 

I'm in the camp to always refuse the warranty. If they didn't make a huge profit on them, there wouldn't be such a hard sell. And that includes the $1300 Hondacare. Guaranteed they make more on the warranty than on the sale of the car itself. Just put the money in the bank every time someone tries to sell you an extended warranty on anything, and use that money to pay for out of warranty repairs. If you never need a repair, it's money saved.

 

What your dealer tried to sell you was an atrocious deal. Obscenely overpriced aftermarket “warranty” that may (but may not) cover much of the car. No wonder dealers get such a bad rap. If you decide to get extended coverage on the car for repairs, be sure to get the Honda brand and negotiate a price close to what others on here have paid. Some folks on here will recommend extended coverage and some will not. Go with what you’re comfortable with. Honda Care covers the car, except for normal wear items like brakes and filters. You can get a complete list of wear items not covered on the Honda Finance web site, but I’m impressed with its really very complete coverage. If I decide to keep my Clarity long term, I’ll get the extended coverage.

 

I completely suck at car buying! It's been 20 years since I bought my last new car and now I remember why. Apparently nothing has changed. You still have to run all over town or risk paying way above the best price. And then they run you through the finance gauntlet whether you're paying cash or not. I may start another thread to see if they just do this to women or what. I'll be back in there tomorrow to see how much hassle I get when I opt to return the extended warranty. Glad I found this forum!

 

The information wasn't available online, but I filled in their form to request a quote. Thanks!

 

Hi Margo - No, it is not just women.... My dealer was very good; very happy with them BUT I had to go through the finance guy where I told him I want 'nothing' - but still got pushed for fabric protection, paint protection and rust prevention (completely bogus electronic gizmo that plugs into the OBD? port - on a car mostly aluminum!) - I DID buy the Honda 8 year ext warr tho'. Good luck. (For fabric(suede) Ii bought a 3M upholstery protection spray at Canada Tire)

 

I agree with JohnT that it’s not just women. There is so much information out on the web and in forums like this that the easy money dealers got is over. The only place they can really profit is in these add on like a $2500 warranty that is probably 75% profit. When I went in to close I printed out the Hyannis Honda quote and (since i’m In MA) the Drive Green Discount page and just told them they had to match it or I was going to another dealer to buy the car. I didn’t get the run around at Tbe Honda Store (I was very satisfied with the buying experience there). I will say that the last time I bought I car even with all of my pedantic planning I still got the finance runaround at another dealer (Boch Honda) that was so annoying I would pay another dealer more money so Boch would never get my money again. This forum saved me at least $3k. I would never have known about the drive green discount and the debates on the warranty were helpful as well (I did get the warranty). I also probably wouldn’t have even decided to trade in my ‘16 Accord Touring if it wasn’t for the comments in this forum. I liked the car but the commercial reviews weren’t helpful. There is nothing like reviews written by people who already own the car!

 

My take was influenced by an article I read back in the 1980’s in Consumer Reports on the issue. Summary: most mechanical failures occur during two phases of a mechanical item’s lifetime:

1) Early on, due to assembly errors or mechanical defects.

2) Late in life, due to wear.

The key is, most of the “early on” issues are typically covered by the manufacturer’s warranty. And many, if not all of the wear items occur much later, often after the extended warranty period. And to add insult to injury, wear items are often excluded from extended warranties. In short, an extended warranty covers the time period one is least likely to need it.

Mike Busch is an authority on aircraft mechanical failures. He calls the failures early on as “infant mortality”, and calls the shape of a chart of failures over time as “bathtub-shaped”:



I made a decision back in the 1980’s to NEVER buy an extended warranty of any kind. If I added up all the warranties I’ve been offered over the years on autos, motorcycles, appliances and electronics, I’ll bet it adds up to around $20,000 all in. That’s like money in the bank, so to speak*, that’s available to cover an eventual uncovered repair. I also can’t recall any mechanical issues where an extended warranty would have helped.

All that said, purchasing an extended warranty can be a rational choice. If one is in a financial situation where they can afford the extended warranty but could not afford an uncovered repair, then the extended warranty makes sense. Everyone’s situation is unique.

*If I could time-travel back to the 1980’s, I might have made a game of investing the premium of each and every extended warranty offered. If I had put those amounts into a conservative stock or bond mutual fund and reinvested dividends, I’d probably have at least $50,000 in that fund by now. That would certainly cover any unexpected repair! Just a thought for the youngun’s out there!

 

That’s an interesting curve. Good info. However, if one looks at big data to see where problems are occurring in vehicles, it’s often the electrical/electronics components and not the mechanical components. For example, most of the problem areas in vehicles in the Consumer Reports data are in things like Power Equipment/Accessories or In Car Electronics, not in things like Engine Major or Transmission Major. I wonder how Busch’s curve would look for electrical failures?

 

What is the advantage of asking the home dealer to match? If you get a $1300 quote from Hyannis Honda why not simply take that deal? After all, the work can be done anywhere in the U.S?

 

I had my dealer match their price so I could fold it into the 0.9% financing and have no down payment. 0.9% is as close to free money as you can get. That freed up funds to keep invested that have way more than a 0.9% return, so I’m ahead.

 

I never buy extended warranties, however I did on this car and like KentuckyKen I rolled it into the .9% financing. It seemed like money well spent to me. If I have even one issue say 5 yrs. from now it'll be money well spent.

 

No impact to me really, but we always try to "shop local." I try to think of other people when I make a decision.

 

The price of Honda Care extended warranty is reasonable. Although power train and battery systems are already covered, there are a lot of items that can go wrong. I am mainly concerned about driver assist sensors and air conditioning. One look under the car and I decided there is no way I am going to let any shop touch this car other than a Honda service center. You just need to be decide about the time frame that you are keeping the car. I thought probably 7 years, so I bought a 6 year warranty with matching mileage.

 

Any updated information on this ? If the warranty price stays the same at the 3 year mark (except for the standard annual price increase), it may be better to wait and buy as
1) There is time value of money
2) We will have much more data points on components failing or not.
3) We will have the self driving 500 mile in 5 min charge car by then and Clarity PHEV will be a relic. J/K

 

Great episode!

 

The thing i hate about extended warranties is statistically they don't extend out far enough. When your car has a high probability of failure your warranty is probably expired. Its the art of timing the percentage of failure to thier favor. But for some people who are overwhelmed by the potential of an expensive failure I say go for it. That said maybe some could testify how they hit a grand jackpot of savings because they had an extended warranty. I would like to hear some actual positive experiences.

 

Statistically, a warranty is a clear loser. Sure, there will be exceptions where they pay off, but those are few and far between. If you just decline extra warranties every single time and sock the money away, you will almost certainly end up ahead. There's a reason why the finance person pushes so hard to sell the warranty, and it isn't your well being.