Son is looking to buy a 2 yr old toyota 4runner, has 30k miles on it. Getting a good price but I am wondering about a warrenty. It comes with a 12 month bumper to bumper and 7 yr poewrtrain but that is it. Dealer is offering for about $1850.0 an additional 5 yr/100,000 mile. This will start after the 12 month b to b, but that is only 70 more miles. My son currently does about 10k a year but that can always change.
Any thoughts? I have no idea about this. I know my brother drove his first 4runner until 250K mikes and has almost 175 on his second with very few repairs.
Is this a fair price ? A good idea? We usually keep our cars a long time/high miles and the repairs don't usually start until after 100K.
It really depends on your son. Will he be willing to drive the car through the end of the warranty? If you sell the car before the 6 years is up, you won't get full value for the warranty. That's even if the warranty will transfer to the new owner (and not a guarantee that it will). Also, is your son unlikely to total the car within that time period? If you total the car, the insurance company won't pay for the extended warranty.
You also need to figure out what the exact terms are. 5 year, 100,000 is that 100,000 miles total on the car? If so, then it's really 5 years, 60,000 miles (assuming that your son drives 10k in the first year). Is it a true exclusionary policy? Meaning that it lists what is not covered as opposed to listing items which are covered? Then, do your research on the car itself. What are some of the major issues that that particular model has? You can check true delta (
https://www.truedelta.com/) which are real owners giving real updates, including costs.
Also, you have to re-examine your son's own saving habits. Could he take that $1850 and invest it and continue to add to it to handle any expensive repairs? If he can, it might make sense to forego the extended warranty. Also, your risk will be somewhat mitigated because you have a year of the bumper to bumper warranty for a year to determine if there are any issues.
Finally, keep in mind that just because they quote $1850 doesn't mean that it has to be $1850. Extended warranties, like everything else, are negotiable. If they gave you a great price on the car, they may be banking on gouging you on the extended warranty. Rest assured that the first price they give you bakes into it a pretty good amount of profit for them. At a minimum you should be able to get it down by a couple of hundred dollars. Even then, they will still make a profit. It is found money for them.
As for everyone saying it's a bad value, just remember that it's an insurance policy. Like every insurance policy, the insurance company always wins. Always. They are not in the business of losing money. Even if you made money based on a claim, that means someone lost money. Of course no one would forego an insurance on the house. But that's because it is risk mitigation. Extended warranties, like an insurance policy is risk mitigation. How much risk do you want to mitigate and at what price?
