G35 Repair Costs - Extended Warranty?
#16
I honestly don't know if its hit or miss or common.. Let me tell you that a forum member here that I know "princess_jen" has had pretty much nothing but trouble with her car too.. She has the 05 6MT revup.. New motor replaced under warranty, new tranny under warranty, new gas tank under warranty, air bag light kept flashing and that got fixed under warranty.. Her front tires keep on getting chewed up on the inside and she is aligned right.. Control arms have gone out on her and her passenger seat controls were not working the last few times I was with her in her car.
Lucky for her all that was done in factory warranty which is now expired for her so she's all by herself now.
Lucky for her all that was done in factory warranty which is now expired for her so she's all by herself now.
#17
#18
Total cost just over $1000 and out of service for a total of about 3 days. In comparison my 08 Infiniti has been out of service for over 16 days when it reached about 13k miles with just under one year of service. Jury is till out on its reliability.
But still as far as a warranty goes, so far in both cases it would not have paid to do so with either vehicle yet, just depends on how the Infiniti behaves after the factory one runs out.
My wife does have one for her Versa. Two reasons it has the CVT which I wanted since I like gadgets (but don't trust since my Honda Odyssey atv days, a pain but a kick) and for her piece of mind later on, but not really for economic reasons that I can justify.
#19
Join Date: Oct 2009
Location: Whittier, CA
Posts: 120
Likes: 0
Received 0 Likes
on
0 Posts
I honestly don't know if its hit or miss or common.. Let me tell you that a forum member here that I know "princess_jen" has had pretty much nothing but trouble with her car too.. She has the 05 6MT revup.. New motor replaced under warranty, new tranny under warranty, new gas tank under warranty, air bag light kept flashing and that got fixed under warranty.. Her front tires keep on getting chewed up on the inside and she is aligned right.. Control arms have gone out on her and her passenger seat controls were not working the last few times I was with her in her car.
Lucky for her all that was done in factory warranty which is now expired for her so she's all by herself now.
Lucky for her all that was done in factory warranty which is now expired for her so she's all by herself now.
#21
A good insurance company would be running off tables for autos the same way they do for humans. But in reality they could pay out exactly what you initially paid in and come out ahead. The key is they invest what you paid in when you paid it in but they pay out later. In between your cash is earning them cash.
If you paid something like $2000 for a warranty then at 10% interest they would make about $209 the first year and pay out nothing. After 3 years at 20k miles per year they have still paid out nothing but earned nearly 700 bucks. So at this point even if they gave back your entire $2000 they have made $700. At 72 months about $1635. These is pretty much a simplied set of figures.
If you paid something like $2000 for a warranty then at 10% interest they would make about $209 the first year and pay out nothing. After 3 years at 20k miles per year they have still paid out nothing but earned nearly 700 bucks. So at this point even if they gave back your entire $2000 they have made $700. At 72 months about $1635. These is pretty much a simplied set of figures.
On the other hand, it wouldn't surprise me if there isn't a VERY large commission paid out. 30%+ or more wouldn't surprise me. This would help explain some of the discounted prices you see posted here for warranties.
And, yes, there can be years they make 10% on the money (minus commission). But there can be years it goes down 30%. Safe investments don't make 10% consistently.
I would think that, on average, they have to pay no more than 50% of the purchase price of the warranty out on payments to make money all along the chain. The individual person who gets a $3000 engine replacement comes out ahead. The larger number of people who get maybe $200 or $300 worth of coverage for $1000 get, at best, peace of mind.
My truck had $400 worth of saved money for $1200 purchase price. My current G35, for the $800+ I paid, saved me $500 nearly 2 years ago, and I'm having another repair made next week. So I'll be $200 ahead, which after interest, etc, is essentially a wash compared to paying for the repairs myself. Unless I have another problem in the next 11 months.
#22
Join Date: Oct 2009
Location: Whittier, CA
Posts: 120
Likes: 0
Received 0 Likes
on
0 Posts
#23
Not to state there isn't a value, but more likely than not that value is on the order of 'peace of mind for piece of hind'.
#24
I think that, over the last 10 years, you won't find too many "safe" investments that earned anywhere close to 10%. 10 years ago we were very near the top of a bubble. Some mutual funds purchased then are still well below what I paid.
Over a 1 or 2 year period, you can generally look back and see something that did 10% or better. Gold over the last couple years, for example. But over, say, the last 30 years gold is up under 30% nominal, or a big net loss when inflation is factored in.
I suspect that where investments made by insurance companies really make a big difference is in life insurance. You make 20 years of payments, 30 years, or longer. The payout, if you receive it, is larger than the payments. But that is also feasible because many times the payouts are never made. You drop the policy, for whatever reason (kids grow up, etc), so there isn't any payout whatsoever.
Over a 1 or 2 year period, you can generally look back and see something that did 10% or better. Gold over the last couple years, for example. But over, say, the last 30 years gold is up under 30% nominal, or a big net loss when inflation is factored in.
I suspect that where investments made by insurance companies really make a big difference is in life insurance. You make 20 years of payments, 30 years, or longer. The payout, if you receive it, is larger than the payments. But that is also feasible because many times the payouts are never made. You drop the policy, for whatever reason (kids grow up, etc), so there isn't any payout whatsoever.
#25
Of course, much of the payout on an extended warranty (for a new car) is delayed. My 7 year extended warranty is only exposed to powertrain problems for 1 year. So, they are responsible if a problem hasn't shown up during the previous 6 years. Possible, but if it had been something wrong from the factory, it probably would have shown up before. Now, with the mileage cap, they can be exposed if I had hardly driven the car the first 6 years, and then I start to drive it heavily the 7th year. Again, something they are risking.
Another way they can benefit is if, after 4 years, I trade the car in for another. I think you can get some type of refund, but I doubt it is a full refund of the purchase price (which would include commission). If it is prorated, then I would get back less than half, even though everything to this point would have been covered by the factory warranty.
Another factor that MAY also come into play is that the payouts may not be as much as it looks. If, out of pocket, a repair may have cost $600. With warranty, there is the $100 deductible, and maybe the warranty rate is lower, and the service department only gets $400 from the warranty company. You see $500 savings, the payout is $400.
Another way they can benefit is if, after 4 years, I trade the car in for another. I think you can get some type of refund, but I doubt it is a full refund of the purchase price (which would include commission). If it is prorated, then I would get back less than half, even though everything to this point would have been covered by the factory warranty.
Another factor that MAY also come into play is that the payouts may not be as much as it looks. If, out of pocket, a repair may have cost $600. With warranty, there is the $100 deductible, and maybe the warranty rate is lower, and the service department only gets $400 from the warranty company. You see $500 savings, the payout is $400.
#26
I think that, over the last 10 years, you won't find too many "safe" investments that earned anywhere close to 10%. 10 years ago we were very near the top of a bubble. Some mutual funds purchased then are still well below what I paid.
Over a 1 or 2 year period, you can generally look back and see something that did 10% or better. Gold over the last couple years, for example. But over, say, the last 30 years gold is up under 30% nominal, or a big net loss when inflation is factored in.
I suspect that where investments made by insurance companies really make a big difference is in life insurance. You make 20 years of payments, 30 years, or longer. The payout, if you receive it, is larger than the payments. But that is also feasible because many times the payouts are never made. You drop the policy, for whatever reason (kids grow up, etc), so there isn't any payout whatsoever.
Over a 1 or 2 year period, you can generally look back and see something that did 10% or better. Gold over the last couple years, for example. But over, say, the last 30 years gold is up under 30% nominal, or a big net loss when inflation is factored in.
I suspect that where investments made by insurance companies really make a big difference is in life insurance. You make 20 years of payments, 30 years, or longer. The payout, if you receive it, is larger than the payments. But that is also feasible because many times the payouts are never made. You drop the policy, for whatever reason (kids grow up, etc), so there isn't any payout whatsoever.
One of the worst places is a 401k plan during the years leading up to retirement. Safe during the years where contributions are the major source of growth but not so in the few years prior to retirement. For example in my final year I lost close to 25% with more to follow (which I could not stem due to available investments). One reason the 401 k is bad is that as you approach retirement your exposure to a bad year increases especially since your retirement may well be combined with a force layoff which we have recently seen the result of. A younger worker will pick up and leave and his exposure is less.
There is a way to actually make a fairly good return by simply borrowing against your 401k (if the plan allows) but you have to be disciplined to do so. You'll gain about 7% by doing so assuming you understand the market.
A year to year 'safe' investment will be about equal to simply spending your money based on inflation. During this year my investments have earned almost exactly 20% so far. It actually is a little bit more than this since I took out about 7% to live on. I believe next year this will drop to about half of this (about 10%).
#27
Kind of proves my point. Making investments to cover a 7 year time frame is a crapshoot. I would have to see some evidence that car warranty insurance policies are assuming, and getting, over 10% annual returns to cover them.
And even 10 years apparently isn't long term. I was just looking around, and averages were generally given over 25 years. Which can vary from an average of 9% to 11%. But the variability from year to year can be very high.
It still seems more likely that investments made for insurance purposes are more likely to be more stable investments that earn, on average, less than this but are less likely to drop 50% in any given year. And just depend on pricing the policies such that the average payout over the life of the policy is less than what they are paid. Investments, etc, could then help cover costs of employees, profit, etc.
And even 10 years apparently isn't long term. I was just looking around, and averages were generally given over 25 years. Which can vary from an average of 9% to 11%. But the variability from year to year can be very high.
It still seems more likely that investments made for insurance purposes are more likely to be more stable investments that earn, on average, less than this but are less likely to drop 50% in any given year. And just depend on pricing the policies such that the average payout over the life of the policy is less than what they are paid. Investments, etc, could then help cover costs of employees, profit, etc.
#28
Kind of proves my point. Making investments to cover a 7 year time frame is a crapshoot. I would have to see some evidence that car warranty insurance policies are assuming, and getting, over 10% annual returns to cover them.
And even 10 years apparently isn't long term. I was just looking around, and averages were generally given over 25 years. Which can vary from an average of 9% to 11%. But the variability from year to year can be very high.
It still seems more likely that investments made for insurance purposes are more likely to be more stable investments that earn, on average, less than this but are less likely to drop 50% in any given year. And just depend on pricing the policies such that the average payout over the life of the policy is less than what they are paid. Investments, etc, could then help cover costs of employees, profit, etc.
And even 10 years apparently isn't long term. I was just looking around, and averages were generally given over 25 years. Which can vary from an average of 9% to 11%. But the variability from year to year can be very high.
It still seems more likely that investments made for insurance purposes are more likely to be more stable investments that earn, on average, less than this but are less likely to drop 50% in any given year. And just depend on pricing the policies such that the average payout over the life of the policy is less than what they are paid. Investments, etc, could then help cover costs of employees, profit, etc.
If you drop down to averages less than 10 years for 1997 - 2007 it will drop below the 9-10% mark for years 1999 through 2002 to 2007 (ie 1999-2007 = 4.81%) but 2003-2007 yields 13.11%. Insurance companies will not only play the stock market but also purchase long term annuities and so on to even out the yearly rate of returns. An annuity will typically pay you around 6%. A member of my family has an interesting account in that she takes none of the loses in return for only taking 80% of the gains.
If you live on your investments like a day trader you will almost always come out a loser. When you don't you will win on the long run. Take a 10 year period back from these years and watch what occurs to the 10 year average. For example 1992-2002 = 10.93%. Yep a year like 2008 will mess with you but only if you can't stay in the game. In my case my gains this year exceed my loses for 2008 so when I go to average 1999 - 2009 I would still be up above 10%.
Personally I think auto policies are often handled like rebates. The companies rely on not paying even if they would have to if claims are made.
How many keep their cars past the end of their factory warranties and of those that don't how many extended warranties actually end up transferred to the new owners? These just add to their bottom lines.