[epicaccord]

Joe-BMW33

Are you pissed off you didn't get in a head on collision so you can "use" your auto insurance? 🤣😉

[Joe-BMW33]

Originally Posted by epicaccord

Joe-BMW33

Are you pissed off you didn't get in a head on collision so you can "use" your auto insurance? 🤣😉

😂

[LogicalApex]

Originally Posted by ezaircon4jc

I've purchased one extended warranty. The one repair I needed wasn't covered, just like Pierre said. We have a 2014 F10 535i with just over 78K miles and nary a problem; including the much maligned OFH & valve cover gaskets. I would have no problem taking that car on a 5K mile road trip. If companies didn't make money off EW's, they wouldn't sell them. Kind of like casinos; they didn't build those million dollar casinos on losers! The extended warranty debate is just like the which wax/oil/gas/etc. is best.

As my dad once said when pushed to buy an extended warranty on something he was buying... "So, are you saying you're selling me junk?"

Extended warranties are all about risk pooling. Like all insurance...

But what gets lost on people who are quick to note that extended warranties are crap buys are ignoring the perverse incentives that exist in the market. For instance, on my previous Samsung fridge the ice maker was garbage and Best Buy replaced the thing 2x a year or so until my extended warranty expired after 5 years. Samsung got sued in a class action over it. Of course, Samsung made money every time someone had to buy a new Icemaker to replace a broken one. That's the perverse incentive I'm referring to here. Manufacturers can offer shorter warranties and profit off the third party warranty repairs. Shifting the cost burden onto extended warranty providers.

I paid $250 for the BB extended warranty and it paid for itself quickly. I mean you could argue I could have skipped the extended warranty and just ignored the ice maker once it broke, but I'm not the kind of guy to leave things broken. Samsung charged over $500 for those repairs each time if you went through them...

I also purchased Wheel & Tire on my last car for $800 for 5Y and I had over $2K in claims since the roads in Philly are probably worse than in Columbia. The W&T company gladly paid without debate.

When discussing the "profit" potential of any insurance related product it is true that there will be some who pay premiums who never recoup them in claims. Maybe the car is totaled and they forget about the policy or they have a very reliable one or any number of other factors. The insurance company can also invest the premiums heavily and stay topside in that area alone even if claims exceed premium payouts. They can also negotiate pricing on parts and etc better than we can.

But the most important aspect for us, here, is just the simple basic pooled risk aspect. A German luxury car will tend to have higher repair costs than most cars simply due to them pushing the limits on features. They tend to be on the cutting edge of technology and other areas so mixing with a pool that includes cars with less bleeding edge features will lower the out of pocket costs for people in our shoes while still allowing a warranty company to profit.

The best analogy I can give you is health insurance. When you're 20 it seems like a poor buy as you're unlikely to face significant health problems, but when you're 60 and taking 5 different maintenance medications and could end up with expensive care needs it is a no brainer to buy. But it wouldn't be profitable or sensible for health insurance to only exist for an older sicker population so you need to mix in younger and healthier people to spread the risk around and lower the costs for everyone.

Are you guaranteed to have a lot of covered claims on a G30? No, but BMW has a LOT of TSBs on all kinds of electronic and electrical failures in these cars where their coverage for them stops with the bumper to bumper warranty. Like the yellowing DRL which dealers are quick to try and ask $6K to repair...

[epicaccord]

Originally Posted by LogicalApex

Extended warranties are all about risk pooling. Like all insurance...

But what gets lost on people who are quick to note that extended warranties are crap buys are ignoring the perverse incentives that exist in the market. For instance, on my previous Samsung fridge the ice maker was garbage and Best Buy replaced the thing 2x a year or so until my extended warranty expired after 5 years. Samsung got sued in a class action over it. Of course, Samsung made money every time someone had to buy a new Icemaker to replace a broken one. That's the perverse incentive I'm referring to here. Manufacturers can offer shorter warranties and profit off the third party warranty repairs. Shifting the cost burden onto extended warranty providers.

I paid $250 for the BB extended warranty and it paid for itself quickly. I mean you could argue I could have skipped the extended warranty and just ignored the ice maker once it broke, but I'm not the kind of guy to leave things broken. Samsung charged over $500 for those repairs each time if you went through them...

I also purchased Wheel & Tire on my last car for $800 for 5Y and I had over $2K in claims since the roads in Philly are probably worse than in Columbia. The W&T company gladly paid without debate.

When discussing the "profit" potential of any insurance related product it is true that there will be some who pay premiums who never recoup them in claims. Maybe the car is totaled and they forget about the policy or they have a very reliable [...]

Great logical explanation. 👍

[NGT2]

The other thing, in the case that you're buying CPO like and others, is considering what I paid for the car vs the guy buying new. I'm buying a 3 year old car to drive for 5 years. I paid maybe 60% of what the car was new. But if I want that warranty peace of mind that the new car buyer gets, I have an itemized price to pay. The new car buyer pays for the warranty too, it's just not itemized on the spec sheet.

For me, assuming we say 100k miles is the prime usage life, with anything above being gravy:

Bought a 3 year old car with 30k miles. So it has 70k miles or 70% of its prime life left.
Paid $43k for a car with a $70k sticker, so I paid 61% of MSRP. That came with 10 months of factory warranty plus one year CPO.

So I'm at a 61% price to get 70% life. After the CPO is up, I run the risk of increasing that investment because of unexpected repairs.

So my decision is do I want to proactively up my investment to 65-67% in order to cap it. And I don't have to decide until I've had the car long enough to know I want to keep it all the way to that 100k mile mark. Not a bad deal.

Just different way of explaining what's already been said.

[epicaccord]

Originally Posted by NGT2

The other thing, in the case that you're buying CPO like and others, is considering what I paid for the car vs the guy buying new. I'm buying a 3 year old car to drive for 5 years. I paid maybe 60% of what the car was new. But if I want that warranty peace of mind that the new car buyer gets, I have an itemized price to pay. The new car buyer pays for the warranty too, it's just not itemized on the spec sheet.

For me, assuming we say 100k miles is the prime usage life, with anything above being gravy:

Bought a 3 year old car with 30k miles. So it has 70k miles or 70% of its prime life left.
Paid $43k for a car with a $70k sticker, so I paid 61% of MSRP. That came with 10 months of factory warranty plus one year CPO.

So I'm at a 61% price to get 70% life. After the CPO is up, I run the risk of increasing that investment because of unexpected repairs.

So my decision is do I want to proactively up my investment to 65-67% in order to cap it. And I don't have to decide until I've had the car long enough to know I want to keep it all the way to that 100k mile mark. Not a bad deal.

Just different way of explaining what's already been said.

This is the smart way to go if client is ok with pre-owned car compared to new. The first client who bought brand new, took the first major hit depreciation and taxes. You can have the same car and pay for the extended warranty and it's not as expensive as buying new.

[NGT2]

Originally Posted by epicaccord

This is the smart way to go if client is ok with pre-owned car compared to new. The first client who bought brand new, took the first major hit depreciation and taxes. You can have the same car and pay for the extended warranty and it's not as expensive as buying new.

Yep. Just have to have all that in mind. That's why I like CPO.

1 - I have immediate coverage, so I can use the immediate budget to buy the car I want and piece of mind it's in good shape.

2 - I know the cost of warranty is out on the horizon, but I get time to confirm it's a 5 year car for me before I pay for the coverage.

Edit - and of course I'm paying the depreciated price

[Pierre Louis]

Originally Posted by Joe-BMW33

You're not telling anyone what they don't already know. I'm pretty sure the crowd here understands the mechanics of insurance. It's not like you turned the light bulb on "Woah, they make money???"

Every once in a while I walk into a Casino and kill it at Black Jack (well it happens a lot but play along). I'm the only one of every 10-15 people who leave happy. I walked in with $3,000 in my pocket and walked out with $20,000 (true story). The other 10-15 people lost $100,000 collectively.

We are interested in EWs to remove the risk or reduce the odds that we are going to be in the $100,000 category and sometimes we end up being a winner by spending $3,000 to "win" a $20,000 repairs. But we are not in this to pray for failures to make our money back. At least I'm not. I will probably spend $3,000 and hope I never use it.

Look up the meaning of Insurance. It's all about minimizing risk. It's the price you pay for removing risk. By not having it, I could argue you're gambling you are not going to be in the $20,000 repair club.

By avoiding most extended warranties, I roughly calculate that being ahead by about $24,000 helps me pay for the rare expensive repair that would happen below 120,000 miles. Owning any car is still a gamble.

[NGT2]

Originally Posted by Pierre Louis

By avoiding most extended warranties, I roughly calculate that being ahead by about $24,000 helps me pay for the rare expensive repair that would happen below 120,000 miles. Owning any car is still a gamble.

Not if you're covered

[turbobeagle]

The debate about how the underwriters need to make their money is a tired one, but something that I think doesn’t get mentioned often enough is that with virtually any kind of insurance product, a massive portion of the premium gets sucked up by fraud, or the effort to prevent it. If you are an honest person, that is a tax your are paying. So it isn’t just about the requirement of profit of the administrator that sets you back, it’s also the fraud overhead you choose to pay by joining that risk pool.

Traditionally (like in our grandparents’ era), one generally wouldn’t choose to pay that tax unless it was to defend against a financially ruinous outcome (health, natural disaster, unemployment, etc).

[NGT2]

Originally Posted by turbobeagle

The debate about how the underwriters need to make their money is a tired one, but something that I think doesn’t get mentioned often enough is that with virtually any kind of insurance product, a massive portion of the premium gets sucked up by fraud, or the effort to prevent it. If you are an honest person, that is a tax your are paying. So it isn’t just about the requirement of profit of the administrator that sets you back, it’s also the fraud overhead you choose to pay by joining that risk pool.

Traditionally (like in our grandparents’ era), one generally wouldn’t choose to pay that tax unless it was to defend against a financially ruinous outcome (health, natural disaster, unemployment, etc).

True. But our grandparents didn't have navigation, touchscreens, massaging seats, etc. I know I'm a broken record on it, but that's what makes me consider it. It's not hard to spend $3k on those kinds of things over years 5-8 of car life.

[turbobeagle]

Originally Posted by NGT2

True. But our grandparents didn't have navigation, touchscreens, massaging seats, etc. I know I'm a broken record on it, but that's what makes me consider it. It's not hard to spend $3k on those kinds of things over years 5-8 of car life.

Even with all the tech, cars today are way more reliable than our grandparents’ cars. It’s not even close. But that’s beside the point. I understand and respect your position if the emotional relief is simply worth that much to you.

I will suggest one more self-test though (in addition to the financial ruin test in my previous message). Imagine that the numbers and risk profiles were all the same, but that the product being insured wasn’t a “fun” or “precious” item that had emotions associated with it. Suppose it was a water heater or something like that. Or a Toyota Corolla . Would you still buy the warranty?

Just food for thought.

[BMW012]

Originally Posted by turbobeagle

Even with all the tech, cars today are way more reliable than our grandparents’ cars. It’s not even close. But that’s beside the point. I understand and respect your position if the emotional relief is simply worth that much to you.

I will suggest one more self-test though (in addition to the financial ruin test in my previous message). Imagine that the numbers and risk profiles were all the same, but that the product being insured wasn’t a “fun” or “precious” item that had emotions associated with it. Suppose it was a water heater or something like that. Or a Toyota Corolla . Would you still buy the warranty?

Just food for thought.

lol i dont think people compare their bmws to water heaters and toyota corollas because we have more faith in them

[turbobeagle]

Originally Posted by BMW012

lol i dont think people compare their bmws to water heaters and toyota corollas because we have more faith in them

My G30 has been WAY more reliable than my damn water heater

[ezaircon4jc]

Originally Posted by turbobeagle

My G30 has been WAY more reliable than my damn water heater

Or our touchless kitchen faucet. We're about to be on our 2nd replacement. They seem to last a little less than 3 years.

[BMW012]

Originally Posted by turbobeagle

My G30 has been WAY more reliable than my damn water heater

shieeeee***t

[Sxs1687]

Originally Posted by LogicalApex

Extended warranties are all about risk pooling. Like all insurance...

But what gets lost on people who are quick to note that extended warranties are crap buys are ignoring the perverse incentives that exist in the market. For instance, on my previous Samsung fridge the ice maker was garbage and Best Buy replaced the thing 2x a year or so until my extended warranty expired after 5 years. Samsung got sued in a class action over it. Of course, Samsung made money every time someone had to buy a new Icemaker to replace a broken one. That's the perverse incentive I'm referring to here. Manufacturers can offer shorter warranties and profit off the third party warranty repairs. Shifting the cost burden onto extended warranty providers.

I paid $250 for the BB extended warranty and it paid for itself quickly. I mean you could argue I could have skipped the extended warranty and just ignored the ice maker once it broke, but I'm not the kind of guy to leave things broken. Samsung charged over $500 for those repairs each time if you went through them...

I also purchased Wheel & Tire on my last car for $800 for 5Y and I had over $2K in claims since the roads in Philly are probably worse than in Columbia. The W&T company gladly paid without debate.

When discussing the "profit" potential of any insurance related product it is true that there will be some who pay premiums who never recoup them in claims. Maybe the car is totaled and they forget about the policy or they have a very reliable [...]

Where did you purchase your W&T insurance from? These damn 668s seem to be soft. But my F10 m sport wheels (351s I think was the model number) were much worse. Those things were constantly bent!!

[NGT2]

Originally Posted by turbobeagle

Even with all the tech, cars today are way more reliable than our grandparents’ cars. It’s not even close. But that’s beside the point. I understand and respect your position if the emotional relief is simply worth that much to you.

I will suggest one more self-test though (in addition to the financial ruin test in my previous message). Imagine that the numbers and risk profiles were all the same, but that the product being insured wasn’t a “fun” or “precious” item that had emotions associated with it. Suppose it was a water heater or something like that. Or a Toyota Corolla . Would you still buy the warranty?

Just food for thought.

Well I hear you, but it's a different proposition than a Corolla or a water heater. The very unlikely but still possible max downside risk is higher on the bmw, as are the incremental repairs (electronics). Self insuring a water heater is pretty easy to swallow. A complete failure just costs you a new one. Painful, maybe, but not that bad.

There is no catastrophic mechanical failure on a Corolla. You can put Jack Daniels in the tank and never change the oil and it will never die!
Haha…. Although I have heard concerning things about their new tundra with the turbo charged 4 cyl. But I digress….

With the BMW the risk of incremental repairs that are easily in the 4 figure range are much more likely when you get into 6-8 years old, and there is a small but still possible risk of catastrophic powertrain failure that probably gets you to 5 figures.

So while I fully understand and respect the position of the self insurer, I also don't think it's the same calculation as the average home appliance or more basic utilitarian commuter vehicle.

[Mandingo9]

Is there any company that says fuck it, we're going to charge you an insane amount but we're giving you bumper to bumper? With all the goddamn exclusions it's like they have an out for any situation.

[TacticalGunnarM550]

Originally Posted by Mandingo9

Is there any company that says fuck it, we're going to charge you an insane amount but we're giving you bumper to bumper? With all the goddamn exclusions it's like they have an out for any situation.

look at roadvantage. $3500 but i'm covered up to 130000 miles, and i can take it to any shop including indy shops…[IMG][/IMG]

[NGT2]

Originally Posted by TacticalGunnarM550

look at roadvantage. $3500 but i'm covered up to 130000 miles, and i can take it to any shop including indy shops…[IMG][/IMG]

This is good to know.

[DT15]

Originally Posted by TacticalGunnarM550

look at roadvantage. $3500 but i'm covered up to 130000 miles, and i can take it to any shop including indy shops…[IMG][/IMG]

TaticalGunnarM550 would you be willing to share where you purchased your roadadvantage warranty? I'd love to have them quote a policy for my 2021 X6