The Profit Machine
Dealers make more profit on extended warranties than on cars. That should tell you something.
When They Make Sense
- Buying a used luxury car (BMW, Mercedes, Audi): repair costs are high
- The model has known expensive failure points
- Manufacturer-backed (Honda Care, Toyota Extra Care), not third-party
- A $3,000 repair would devastate you financially
When They're Bad
- Reliable models with good track records (Camry, Accord)
- High deductible: $500 deductible on a $600 repair is a bad deal
- Third-party warranty with bad reviews: many deny most claims
The Self-Insurance Alternative
Put the warranty premium ($1,500-3,000) into a dedicated savings account. If you need repairs, money is there. If not, it's still your money.