Used car - warranty or no?

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pepperz
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Used car - warranty or no?

Post by pepperz » Wed Feb 14, 2018 9:48 pm

A friend told me this smart approach to buying a new car and avoiding the depreciation hit.

1 - Find the two to three year old version of the car you want.

2 - Get it checked by a good mechanic.

3 - Buy a warranty on the car so you’re covered for at least five years.

Steps one and two I’ve heard before but I’m unfamiiliar with the third and didn’t realize you could arrange for a warranty on any used car...

I thought you could only get warranties through dealers?

I’ve also heard about “Certified Pre-Owned”- is that what this concept is? I thought the Certified Pre-Owned thing was more of a marketing tactic by a dealer.

Please educate me.

randomguy
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Re: Used car - warranty or no?

Post by randomguy » Wed Feb 14, 2018 10:05 pm

CPO give you a longer warranty from the manufacturer (normally like 5-7 years.
Extended warranties are from insurance companies, You tend to have to read them pretty closely to figure out what is covered and what isn't. Dealers sell them (often with some manufacturer branding like HondaCare) but you can also buy them from 3rd parties.

In general you will lose money on extended warranties (most cars are actually pretty reliable up to 100k or so and a lot of the costs are wear items that will not be covered) but every now and then you will win big.

carolinaman
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Re: Used car - warranty or no?

Post by carolinaman » Thu Feb 15, 2018 8:44 am

Extended warranties are a bad idea. Consumer Reports, Clark Howard and other consumer advocates are strongly against them. Once you understand the fine print you will realize everything you think is covered is not. Many repairs are subject to interpretation as to whether it is covered as a warranty repair or a wearable item like brakes. Even reputable car companies like Toyota have lots of dissatisfied customers with extended warranties.

dsmclone
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Re: Used car - warranty or no?

Post by dsmclone » Thu Feb 15, 2018 8:58 am

There is no right or wrong answer because all cars are different. For example, I wouldn't buy an extended warranty on a Toyota Corrola. On the other hand, if I was buying a 3 year old Land Rover, I wouldn't drive it without an extended warranty.

I've owned a lot of CPO cars and for some models it makes sense. My last car was a 2011 Infiniti M56x, which had an original sticker of $72k. I bought it CPO from my local Infiniti dealer for around $35k. It had less than 30k miles. I believe the warranty was for years/unlimited miles. I never had to use the warranty during the time I owned it.

One thing that people seem to ignore is that usually CPO warranties coverage is based on the original sales date when the car was bought new. So if you buy a CPO 2015 BMW that covers you for 5 years, it's only getting you through 2020 not 5 years from today.

Another option is Carmax. Carmax warranty usually has a $100 deductible but the number of years is based on when you buy the car. Here is a fun story on someone getting the most out of a carmax warranty.
https://jalopnik.com/my-range-rover-s-c ... 1733772237

Jack FFR1846
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Re: Used car - warranty or no?

Post by Jack FFR1846 » Thu Feb 15, 2018 9:00 am

I will list the 10 biggest aftermarket warranty companies who were in business 10 years ago and are still in business today:


/end of list.

Yes, none. They all go out of business before they have to pay a lot of money out.
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GDBryan
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Re: Used car - warranty or no?

Post by GDBryan » Thu Feb 15, 2018 9:12 am

Generally used car warranties seem oversold and overpriced, with lots of conditions, and I certainly wouldn't buy one for a new car after the manufacturer's warranty runs out.

One exception is Carmax. I've bought three cars through them and the warranty came in quite handy. They fixed them at their own shop with no problems.

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Toons
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Re: Used car - warranty or no?

Post by Toons » Thu Feb 15, 2018 9:17 am


3 - Buy a warranty on the car so you’re covered for at least five years


I wouldn't ,just sayin,never have bought one on any vehicle.
I take care of them as the miles accumulate. :happy
Remember ,Insurance is sold to make money.
FYI
http://genxfinance.com/is-an-extended-w ... contracts/





:idea:
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chevca
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Re: Used car - warranty or no?

Post by chevca » Thu Feb 15, 2018 10:09 am

You can buy a warranty on about anything. Plenty of companies will gladly take your money. :happy

A warranty is basically buying insurance. Only insure what you can't afford, right? Can you afford a car repair... do you have an EF? If so, skip the warranty.

I bought a used CPO car once. It came with a 3 year and however many miles warranty. I had a MAF issue come up and it was covered. The CPO part was probably priced into it buying a used car. But, it wasn't a high dollar car. I thought that was a good option for buying used.

runner3081
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Re: Used car - warranty or no?

Post by runner3081 » Thu Feb 15, 2018 10:38 am

I bought extended warranties on BMW's. Now, I don't buy them on the Japanese cars that I buy.

WalterMitty
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Re: Used car - warranty or no?

Post by WalterMitty » Thu Feb 15, 2018 10:39 am

I assume you have a typo in your first sentence.

I think it depends on the car. If you're buying a luxury car, where repairs can be expensive, I would by a CPO and pop for the extended warranty.

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dm200
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Re: Used car - warranty or no?

Post by dm200 » Thu Feb 15, 2018 10:42 am

In my opinion, one very important factor is deciding on the purchase of a warranty is the cost.

an_asker
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Re: Used car - warranty or no?

Post by an_asker » Thu Feb 15, 2018 11:15 am

pepperz wrote:
Wed Feb 14, 2018 9:48 pm
A friend told me this smart approach to buying a new car and avoiding the depreciation hit.

1 - Find the two to three year old version of the car you want.

2 - Get it checked by a good mechanic.

3 - Buy a warranty on the car so you’re covered for at least five years.

Steps one and two I’ve heard before but I’m unfamiiliar with the third and didn’t realize you could arrange for a warranty on any used car...

I thought you could only get warranties through dealers?

I’ve also heard about “Certified Pre-Owned”- is that what this concept is? I thought the Certified Pre-Owned thing was more of a marketing tactic by a dealer.

Please educate me.
A few months ago, we were in the market for a car. I thought of getting a low mileage 2-3 year old car which still had a small portion of its original warranty remaining. However, when I looked at the prices (Toyota Corolla, Nissan Altima, Nissan Sentra, etc were some of the car prices I looked at) then compared with a new car, I realized that I could get a new car for about $2000 more compared to a used car with, say, 10k miles on it. With that difference, I preferred buying a new car as it wouldn't come with any existing "baggage".

Anything over the existing warranty, say, 35k miles or over, I was not comfortable buying at all. But that's just me - I'm pretty much an ignoramus as far as car maintenance is concerned. YMMV!

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dm200
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Re: Used car - warranty or no?

Post by dm200 » Thu Feb 15, 2018 11:45 am

A few months ago, we were in the market for a car. I thought of getting a low mileage 2-3 year old car which still had a small portion of its original warranty remaining. However, when I looked at the prices (Toyota Corolla, Nissan Altima, Nissan Sentra, etc were some of the car prices I looked at) then compared with a new car, I realized that I could get a new car for about $2000 more compared to a used car with, say, 10k miles on it. With that difference, I preferred buying a new car as it wouldn't come with any existing "baggage".

Anything over the existing warranty, say, 35k miles or over, I was not comfortable buying at all. But that's just me - I'm pretty much an ignoramus as far as car maintenance is concerned. YMMV!
Yes - this information does tilt toward buying new - at the right price, of course, and for the right car.

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bottlecap
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Re: Used car - warranty or no?

Post by bottlecap » Thu Feb 15, 2018 12:05 pm

Financially, CPOs and extended warranties are a bad deal. You are placing a losing bet when you buy one.

It's like going into a Casino, but the reverse.

The Casino sets the odds and then offers a bet that they know they will win 55% of the time. Sometimes customers walk out with winnings. Most times they don't. Casino makes money.

CPOs and extended warranties are the opposite. They don't set the odds, but they have studied them and know them backwards and forwards. The sell customers a "bet" at a price high enough that the "casino" - the warranty company - will make money on the bet 55% of the time. Sometimes a customer "wins" and needs a repair that is more than the price of the bet. Most times they don't. The warranty company makes money.

The numbers may change, but the truth doesn't.

JT

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dm200
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Re: Used car - warranty or no?

Post by dm200 » Thu Feb 15, 2018 12:17 pm

One indication of the "value" of things like extended warranties is that (at the usual prices) they are extremely profitable and offer high commissions to those who sell them.

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pennstater2005
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Re: Used car - warranty or no?

Post by pennstater2005 » Thu Feb 15, 2018 12:18 pm

Those warrranties are cheap either. I just purchased a 2015 Toyota Camry with 32,000 miles. They attempted to sell me the extended warranty and I politely turned it down. He did ask why and I mentioned that this car shouldn’t have any problems through the three years that warranty would give me.

He didn’t have much to say. I also turned down the gap insurance. I’m hedging my bets.
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dm200
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Re: Used car - warranty or no?

Post by dm200 » Thu Feb 15, 2018 12:44 pm

pennstater2005 wrote:
Thu Feb 15, 2018 12:18 pm
Those warrranties are cheap either. I just purchased a 2015 Toyota Camry with 32,000 miles. They attempted to sell me the extended warranty and I politely turned it down. He did ask why and I mentioned that this car shouldn’t have any problems through the three years that warranty would give me.
He didn’t have much to say. I also turned down the gap insurance. I’m hedging my bets.
Yes - when "selling" the car, the big pitch is how reliable it is and will be, the free warranties, etc. Then, after you BUY - the pitchh is why you should buy the expensive added warranty

chevca
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Re: Used car - warranty or no?

Post by chevca » Thu Feb 15, 2018 12:50 pm

I find it almost fun to see how frustrated the finance person gets as I decline each and every warranty/add on they try to sell... and decline them over and over. You can actually see them go through each technique they try, and when nothing works, I swear some steam comes out of their ears. :happy

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dm200
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Re: Used car - warranty or no?

Post by dm200 » Thu Feb 15, 2018 12:56 pm

chevca wrote:
Thu Feb 15, 2018 12:50 pm
I find it almost fun to see how frustrated the finance person gets as I decline each and every warranty/add on they try to sell... and decline them over and over. You can actually see them go through each technique they try, and when nothing works, I swear some steam comes out of their ears. :happy
Years ago, after purchasing a new car, we had to endure the pitch by the "F&I" (finance and insurance). When we declined the prepaid service, I thought they poor guy would break into tears. The "technique" did not work :)

SeaToTheBay
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Re: Used car - warranty or no?

Post by SeaToTheBay » Thu Feb 15, 2018 1:01 pm

CPO is a great deal. You get a car that's a couple of years old (likely to even be the same bodystyle/generation as new), thereby avoiding the steepest part of the depreciation curve, but also get an inspected car and a warranty that's about as long as it would have been if you bought new (they typically add 1-2 years to the original warranty). Highly recommend it as an alternative to new.

A little more used, my willingness to buy a warranty would depend on the car. For most new cars, no. Modern cars are very reliable, and you're unlikely to have a major problem that makes paying for a warranty worth it. I would never, ever buy a warranty on something like a Camry, Accord, Fusion, etc.

The only real exception I'd make - and did - is for a used car that you know has a tendency to be not super-reliable. As an example, I currently have a 2011 BMW M3, bought in 2016. I bought a warranty because these cars have a tendency for somewhat uncommon - but not THAT uncommon - repairs that are big $$ including replacing the whole engine ($20k). However, it is the car I wanted for various reasons, so I bought a $2,300 warranty that covers those biggest potential bills for another 5yrs/60k, which will be late-2021 and 102k miles (now at 53k).

Will the warranty company make money on me? More likely that not, just like the insurance company. Can I sleep easy for the next five years with my dream car? Yup.

If you do buy a warranty, be very careful about the fine print. Even as a car nut, it's hard to understand exactly what is covered and what isn't (unless you get an "exclusionary" policy which covers everything except specifically listed items), and the deductibles can be hundreds of $, making it so you don't get much value out of more minor to moderate repairs that are a few hundred bucks. I think my deductible is $200 but it can range from $0 to $500+, and often this is per visit.

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TheGreyingDuke
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Re: Used car - warranty or no?

Post by TheGreyingDuke » Thu Feb 15, 2018 1:21 pm

Last I reviewed these are not actually warranties (which have some specific legal requirements) but extended service contracts. Gives the writer of the policy greater leeway as to what is covered.

I did buy one once, my first foray into a semi-luxury auto, 1993 Audi 100. I bought the car from a used car dealer who sold higher-end foreign vehicles. If I recall, spent $900 which almost exactly matched the repairs I had done using it over the next 2 or 3 years.
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Drew777
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Re: Used car - warranty or no?

Post by Drew777 » Thu Feb 15, 2018 2:07 pm

If you're buying a luxury/exotic vehicle known to have expensive repairs then I would recommend getting a warranty. Just do your research and make sure you get a good one. If you're buying a Toyota then don't bother with the warranty. I bought my M6 used, and it already had a warranty. The owner transferred it to me. So far it has paid for an ignition coil that the dealer charged $500 for.

dsmclone
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Re: Used car - warranty or no?

Post by dsmclone » Thu Feb 15, 2018 2:21 pm

SeaToTheBay wrote:
Thu Feb 15, 2018 1:01 pm
CPO is a great deal. You get a car that's a couple of years old (likely to even be the same bodystyle/generation as new), thereby avoiding the steepest part of the depreciation curve, but also get an inspected car and a warranty that's about as long as it would have been if you bought new (they typically add 1-2 years to the original warranty). Highly recommend it as an alternative to new.

A little more used, my willingness to buy a warranty would depend on the car. For most new cars, no. Modern cars are very reliable, and you're unlikely to have a major problem that makes paying for a warranty worth it. I would never, ever buy a warranty on something like a Camry, Accord, Fusion, etc.

The only real exception I'd make - and did - is for a used car that you know has a tendency to be not super-reliable. As an example, I currently have a 2011 BMW M3, bought in 2016. I bought a warranty because these cars have a tendency for somewhat uncommon - but not THAT uncommon - repairs that are big $$ including replacing the whole engine ($20k). However, it is the car I wanted for various reasons, so I bought a $2,300 warranty that covers those biggest potential bills for another 5yrs/60k, which will be late-2021 and 102k miles (now at 53k).

Will the warranty company make money on me? More likely that not, just like the insurance company. Can I sleep easy for the next five years with my dream car? Yup.

If you do buy a warranty, be very careful about the fine print. Even as a car nut, it's hard to understand exactly what is covered and what isn't (unless you get an "exclusionary" policy which covers everything except specifically listed items), and the deductibles can be hundreds of $, making it so you don't get much value out of more minor to moderate repairs that are a few hundred bucks. I think my deductible is $200 but it can range from $0 to $500+, and often this is per visit.
This right here.

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Munir
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Re: Used car - warranty or no?

Post by Munir » Thu Feb 15, 2018 2:36 pm

Excuse my ignorance but what is the difference between a warranty and CPO?

SeaToTheBay
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Re: Used car - warranty or no?

Post by SeaToTheBay » Thu Feb 15, 2018 2:46 pm

Munir wrote:
Thu Feb 15, 2018 2:36 pm
Excuse my ignorance but what is the difference between a warranty and CPO?
CPO = offered by the manufacturer. For instance, the dealer will take a lightly-used car (often a lease return) that is in good shape (not all cars can qualify for CPO), do a thorough inspection and get it certified by the manufacturer as a CPO car, which the manufacturer than applies the extra warranty period to.

https://www.caranddriver.com/features/a ... nd-feature

An aftermarket "warranty" is a service contract where the 3rd party selling the warranty agrees to pay for certain repairs. It can be a lot trickier to make sure you're covered, as they often have certain exclusions depending on the plan you buy, but you can apply these warranties to cars that are a bit older (most CPO cars are only 1-3, maybe 4 years old, but you can get a warranty on cars up to around 10 years old).

The price of aftermarket warranties can vary greatly based on what is covered, how long in years/miles it is, what your deductible is, the type of car, and the age/mileage of the car. For example, for me I wanted pretty much only powertrain coverage (kept the price down), a long term (5 years and 60k is typically the max), fairly high deductible on a pretty expensive, moderate age/mileage car, which worked out to $2,300. Some of the quotes I got for exclusionary (the entire car) coverage of the same car were $6-8k!

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