Originally Posted by Slats
Here, in simple terms, is what purchasing a 7 year extended warranty on a new car looks like:
Mfr. warranty ------------ 4 yrs.
Ext. warranty ------------ first 4 yrs. of 7 yrs.
----------- last 3 yrs. of 7 yrs
You are paying for 4 years (or 50,000 miles) of the extended warranty coverage that is totally unnecessary, because the first 4 years (or 50,000 miles) are covered by the manufacturer’s warranty.
According to the BMW web site, you can purchase an extended warranty at any time before the original manufacturer’s warranty expires. That is when to put your money down, not before.
But even then, there are studies out there demonstrating that extended warranties, which are simply a form of insurance, have very lopsided premiums-paid-to-claims-paid ratios. You can guess in whose favor the lopsided ratio falls.
Additionally, there is a subtle difference between the original manufacturer’s warranty and an extended warranty. If a part is covered under the original warranty and it fails, it is replaced, generally subject only to a finding of abuse. However, under the extended warranty, the part must have failed due to an inherent defect, not just normal wear and tear. Given that parts with inherent defects are going to show up early on, whereas failure from wear and tear is going to show up later, one might wonder how much faith and money extended warranties can justify.
I suppose one exception would be expensive electronic components, which are not so much subject to wear and tear as, say water pumps, and which seem to fail for any number of reasons, not the least of which seems to be the pure spite of gremlins or, perhaps, Darth Vader.
The reason dealers give confusing explanations - and often engage in outright falsehood about – the redundant coverage of extended warranties is because extended warranties are immensely profitable. Dealer markup on them typically runs 50 to 100%. I have seen some with a 400% markup.
In fact, dealers often make more profit on back-end products like extended warranties, maintenance packages, credit insurance, etc., than they make on the vehicle itself. Sewing confusion over these products is therefore in their financial interest.
That said, I am not against a company making a profit. I also realize the value of peace of mind. I just think dealers should be honest about what they are selling and we should be knowledgeable about what we are buying.
Thanks I appreciate posting a different viewpoint and some of your points may be valid, but I do not agree with when is the time to put your money down. As I have stated the longer you wait the more opportunity there is for inflation to raise the price, BMW to change (increase) the price, etc.
Also, buying 1 contract 4 years from now versus buying 50 contracts today will have an impact in how much discount you can negotiate. This is a voluntary GB and anyone can participate or pull out.
Im not sure who you are or if youre just here to throw a wrench in the GB. You have a whole 3 posts and all are in this thread discounting its merits with invalid points. If you change your mind you are welcome to come on board and I dont mind having an alternate/opposing view point in the thread but please keep the facts straight when you post.