Consumer Reports makes no secret of the fact that they think extended warranties are a big old waste of money for consumers, but now they’ve actually launched an advertising campaign against the warranties, says the New York Times.
Not surprisingly, the car dealers who sell the extended warranties disagree. A spokesman for the National Automobile Dealers Association likened the warranties to insurance for which, of course, policy holders as a group pay more than they get back to protect against the rare problem that is ruinously expensive.
Kenneth Weine, a vice president of Consumers Union, said the ad campaign is a way to further the group’s mission, “to make the market a better and safer place for consumers.”
The basis for the campaign is a new survey that shows that most extended warranty purchasers lost money on the deal.
From Consumer Reports:
But extended warranties sell costly “peace of mind” for repair nightmares that probably won’t occur, according to a survey of more than 8,000 readers in December 2007 by the Consumer Reports National Research Center. We have long advised that extended warranties are a poor deal for almost every product. Now we have the first data showing that this advice applies to most new cars as well.
The survey found that warranty buyers on vehicles from the 2001 and 2002 model years paid an average of $1,000 and received $700 worth of repairs in exchange, says the NYT. A full page ad will appear in Tuesday’s USAToday, warning against extended warranties and featuring a sign that says “Pushover on board.”
Bearer of Bad News Decides To Advertise It [NYT] (Thanks, Molly!)
RELATED: Extended Car Warranties Are A Ripoff
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@johnarlington: Sorry but this doesn’t prove anything. I could probably find a similar anecdote about someone in the (insert any industry here) business.
Not saying extended warranties are good, mind you…
I take all the money I don’t spend on all the extended warranties I’m offered and don’t buy (so far, 100% of them) and put it in the bank as my own “insurance” for broken items. And I get to collect the interest.
OK, not really, but you get the point.
And besides, aren’t products supposed to last beyond their warranty periods? If not they must be crap and I’ll stay away from those product brands in the future.
@Verdigris: boy are you right! if it wasn’t for bad luck, i’d surely have no luck at all!
“Our advice: buy a reliable car and skip the warranty.”
Ok CU. I’ll listen to that when you provide a roadmap for developing a proper reliability index on new AND used cars. That’s right, I want to reliably know how reliable a car is, and is going to be for a certain period of time that I expect to use it.
That includes unexpected part failure, expected collision rates (tiered by estimated cost of repair) for my specific driving record (and projected record, just for fun), general maintenance issues including costs for service and replacement for parts beyond their useful life, and, oh hell, how about acts of God too… for giggles. Make sure this is all specific to the car, previous drivers (little old ladies on sundays included), driving schedules, and the regions of the country I plan to drive in.
Hmmm, that’s asking a bit much, though. Maybe we can condense that a little. And since that’s a lot of data to collect and analyze, how about we instead let the market decide what’s best. I know, we’ll even generalize this to a single purchase, like insurance, just in case something should happen outside our nominal projections. Yeah, that’s… wait a minute!
i do want to clear one thing up, but it matters little. when talking about cars, a warranty is FREE, if they are charging money for it then it is called a “service contract”. although, most dealerships brake the rules and still call them all warranties.
C’mon ,people ! This is a numbers game.
Cars are getting better. They have to because of the cutthroat,unforgiving nature of the market in North America…(If you’re reading this in France,I’m glad you got stuck with Renault). Time was , your choices were DESIGNED to die after 3 or so years because the big 3 wanted you back in the market to make them a little richer and more powerful. Now ,thanks to our good friends the Japanese (sorry about that Hiroshima thing) , you can buy a reliable 3-4 year old car and tell these warranty companies to piss up a tree.
“Piece of mind “, my ass ! These things are so riddled with exceptions and gotchas that you would be better off putting the cost in a savings account and paying out the money as needed.
@nequam: let me say you’d be better looking for a reliable dealer, than a reliable car. wimi (what i mean is) a good dealership will do you right reguardless of the car or warranty. to touch on what@Snarkysnake: said, at my dealership, the warranty states you must have receipts for oil changes and the changes must be done every 3,000 miles. but do we actually hold to this – no. we’re not a-holes. we want to make you happy and do the right thing.
so maybe look for a well reputable dealer instead of a well reputable car.
@StevieD:
Sounds more like that CAR was a bad investment.
Hah, my mom bought an extended warranty when she got her 17″ flat-screen TV at Target. I pointed out a blue pixel in the upper right hand corner and her response was “Well, they’ll probably find some way of not covering it” to which I replied “Then why did you buy the warranty in the first place!?” I love my mom, but she’ll always get pulled in by sales staff.
Whenever I’ve purchased a used card at a dealership, I get the spiel about how it’s a great *value*… So, I look at what’s covered, and it’s like nothing you would ever actually have repaired… ever. But then those were also 3rd party warranties.
Perhaps an extended warranty from the manufacturer or dealer, might be better?!
As far other extended warranties go, I’ve always a had a problem with the price. It’s always just enough to make me say nahhh. But there are times when I have purchased them for electronics… My track record is not so good:
~33% of the stuff I’ve had and bought the warranties for I’ve needed.
~33% of the stuff I’ve had and bought the warranties for I’ve not needed.
~33% of the stuff I’ve had and not bought the warranties for I’ve needed.
My problem has been figuring the two last categories: which should be in the former and which should be in the latter…
I had an extended warranty that totally paid off in spades. It was for a Saab though which has a bunch of weird parts (this was before they were GMified). I never had a hassle getting repairs covered and was in the black on it by the first year after the MFG warranty went away. Now this may speak more to the quality of engineering in the car than the value of warranties but I would say depending on the car that you buy an extended warranty can be a valuable thing.
To the guy that had a Land Rover and only had to replace the radio, I say buy a lottery ticket that is some kind of incredible luck.
In other news, people pay more for car insurance than they get back.
Seriously, is this a surprise to anyone? I’m not against or for service plans. You buy it if you want piece of mind, you don’t if you want to take your chances.
I wonder how many salespeople who sell extended warranties have posted in this thread?
I used to sell extended warranties and I’ve learned that they CAN be very valuable… if you know how to use them, have the tenacity to fight for your rights, and remember that you have it when there’s a problem. For people lacking any of these three, they’re a waste.
I have a whole write up on it here:
[www.jeremyduffy.com]
Only a dolt buys these things. Some ass at best buy tried to tell me that the 3 year warranty on the 360′s RROD was an “internet myth” and that I NEEDED the extend plan. I said, no, I NEED to go buy this 360 elsewhere. I mean really, resorting to lying to sell these things?
One of my great joys is being in Best buy listening to sales pitches and them calling them on their bullshit in front of customers. You amazing tales like “1080P is FAR better than hi def, it’s like 3d!” No joke, I heard that on Sunday.
I guess it depends on who you are and what you’re buying. I bought at 2004 Honda CR-V about 4 years ago. I was baffled by the fact that Honda’s standard warranty is so short (3 years, 36,000 miles). I knew I was going to drive the car alot, so I sprung for the extended warranty–I think it doubled it original, though I can’t remember–for an extra $1500. Paid off at a little over $100 per month, I felt incredible peace of mind knowing that it seemed like a small price to pay to have double the coverage. It all depends on what kind of risk you’re willing to assume. As a graduate student with a slim budget, I’d rather pay a little bit more to have better coverage in case something major blew out in the next 6 years. Now, do I consider myself gullible? Hells no! But I do consider myself someone who is not really willing to assume what I consider to be undue risk. It’s the same reason I have health insurance. I’m a healthy person, but who says tomorrow I don’t go to the doctor and wind up diagnosed with cancer? I’d sure wish I had insurance at that point, man.
I generally agree with CU and their denouncement of certain types of extended warranties, but when you’re talking a car–a major investment–I’m not sure the same applies. There’s no way I’m buying an extended warranty on a clock radio or a DVD player.