Jan 03 2012

Weighing the cost of extending our car warranty

We have an ’06 Ford Focus with 45,000 miles on it. Extremely low miles, especially given this was our only car for several years. My parents bought the car new and paid for it for awhile when I was in college and had no means to pay (thank you, Mom & Dad!). Shane and I bought it from them in 2007, and we were able to transfer the extended warranty they had purchased. At the time, the warranty was a little less than $600 and was a 6-year, 60k mile comprehensive warranty.

In the time we’ve owned the car, we’ve had four instances where we’ve filed a warranty claim. The first happened while it was under the original 3-year, 36m factory warranty: shocks. The second was an alternator. The third was a do-hickey computer component for the transmission, and the fourth was for a power train computer component and also the mechanics of the transmission.

This time has been a little nuts since it took awhile to get the part (weird, long story) and we almost picked it up on Friday, but when the mechanic took it for a test drive he noticed it was skipping gears. He’s rebuilding part of the transmission right now.

This would have been an expensive repair bill and we no doubt would have had to tap our emergency fund to cover it.

In addition, we are using a rental car (an ’11 Focus…way different!) and the warranty is covering this use. Our regular auto insurance also covers the insurance for this rental, so I didn’t have to pay Enterprise thankfully.

Our warranty is expiring in May because the car will be six years old. Shirley’s birthday is Cinco de Mayo and we’ll have to have a fiesta for her.

It has been a good lil car to us so far, and I guess it’s starting to show its age a little. Shane uses it for work and it gets decent mileage. We also figure a paid-for car is cheaper to maintain and keep than getting another car. We’ll probably add 8,000 miles or less per year, since it’s just used for his commute and I also drive it when I’m by myself running errands instead of our van. So, if we can get it to 200,000 miles, that’ll be like 19 years from now. In theory, I should be able to teach Johnny how to drive my first car.

Because we intend to keep it for so long, we thought we’d look into extending the extended warranty to see if that would be worth paying for, as opposed to just using our emergency fund. After all, we can’t know if the car will need another expensive repair any time soon. What if the van needs something instead? Or the house? Or anything else?

If we do get a warranty, I’d want the same warranty offered by Ford that we have now, not a third-party warranty. Even so, I’ve found the prices vary by a lot for the same thing. It pays to shop around.

My quote from Ford directly:

36 months, 36k miles: $1,738

36m, 24k miles: $1,535

48m, 36k miles: $1,920

From the Ford dealership where my car is being repaired:

36m, 36k miles: $2,338 – $400 discount for paying in full: $1,938

48m, 50k miles: $2,072 with paid in full discount

ai yai yai. That’s expensive, especially since our car is worth maybe $7,500.

I found another nationwide company that sells this same warranty for a lot less. I asked how they can do that, and he said because they do a big volume of sales in all 50 states. Their quotes:

36m, 24k miles: $1,070

36m, 36k miles: $1,175

48m, 36k miles: $1,260

48m, 48k miles:  $1,390

60m, 60k miles: $1,765

Their longest-term, highest mileage plan is comparable price-wise to a 3-year, lower mile term from Ford. Wow. This last company’s prices are a lot easier to even consider.

We’ll mull this one over. We’ve got until April or so to make up our minds on extending it further. I’m thinking it would be a good thing to do, given that we want to keep the car for a long time and given its history. It could pay for itself in one repair, after all. I’ll also keep shopping around to see what else I can find. Maybe I can get the local dealership to match or beat the best price I can find.

I think we could save up for it between now and then and not have to take any emergency fund money for it. The money might otherwise go to general savings.

What would you do? Extend the warranty or self-insure and hope for the best?



3 Responses to “Weighing the cost of extending our car warranty”

  1. If you end up going with the nationwide company, check them out thoroughly. We had an extended warranty for our car for three years where the deal was that if you don’t file a claim for those 3 years, you get your money back. We had checked out the company, etc. Now that the 3 years are up, we called to see how we would go about getting the $3K back and discovered that the company went bankrupt about a year ago.

  2. Jane, that sucks so much! Geez. Stupid bankrupt companies. The one I’m considering is directly from Ford, though it’s sold by Ford dealers. I guess things could go bad for me if Ford goes under…

  3. I think all these warranty insurance deals are bad. The profit margins are normally huge. Which allow things like paying salespeople large commissions to foist them on people. You do take a risk. But if you self insure these over your life (and do a similar thing with affordable costs – so get high deductibles) you will do well.

    Get insurance for things you can’t self insure – extremely high costs. Health insurance, liability insurance, auto insurance, long term disability insurance, home insurance…
    John Huner´s last post ..USA Adds 200,000 Jobs in December, Unemployment Rate Falls to 8.5%

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Hey! I'm Kacie, wife to Shane and mother to Jonathan (7), Vivienne (5) and Amelia (2) . I write about my family's finance: how we save money, improve our spending, and plan for the future.

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