Edmunds.com | Inside Line | Auto Observer Your Account | Help | Directory
You are here:
![[F]](http://a332.g.akamai.net/f/332/936/12h/www.edmunds.com/media/townhall/webxicons/site.gif){kind=small}
Forums
Smart Shopper Honda Extended Warranties Pricing and Info
3115 messages, Last post on Dec 06, 2009 at 10:39 AM
You are in the Smart Shopper Forum. Your Hosts are kirstie_h & tidester
|
Replying to: jet10000 (Aug 27, 2008 12:48 pm) Please help me out here! You state that consumers are "likely to get a better return on their Honda Care purchase" and "the less you pay, the better your return. Because one's rate of return is based upon the initial investment." You also state that EW companies must make a profit, which means that the vast majority of consumers will pay more for their EW than they get back in repairs. So, lets say you buy a Honda Care warranty for $500 (initial investment) and you receive $250 (return on investment) during the warranty period. What is your rate of return?
|
|
|
Replying to: nortsr1 (Aug 27, 2008 10:24 am) I should rephrase this statement by saying that the majority of US states do not define extended warranties as insurance. The State of Florida is a rare exception. |
|
|
Replying to: mattgg1 (Aug 27, 2008 1:19 pm) What is your rate of return? Total rate of return can be calculated by the formula: (Future Value/Present Value)-1 = rate In your example (250/500)-1 = -50% In my statement where I said the more you pay up front, the lower your return lets say someone like wisemoney paid $1,500 for his Honda Care. Using the same $250 return the formula would be: (250/1500)-1 = -83% -83% is less than -50% hence displaying the correctness of my original statement, the less you pay the better your return. In no case could you get a -200% rate like you originally stated. The lowest rate on a Honda Care would be -100% if you felt you received no value. (0/500)-1 =-100%. Hope that helps.
|
|
|
Replying to: jet10000 (Aug 27, 2008 2:34 pm) (250/1500)-1 = -83% -83% is less than -50% hence displaying the correctness of my original statement, the less you pay the better your return. -jet10000 I think you don't understand that average market value of Extended Warranties is between $1500 and $2500 dollars. The average Extended Warranty is a Poor Deal. Most people pay a high price for extended warranties. That is a fact proven by Consumer Reports. Online warranties are cheaper, so you have a higher chance of getting your money back, but I don't believe in paying for things that might not break. I believe in paying for things that do break, and buying a car that's statistically won't give you $2000 of breakdowns during the EW period.
|
|
|
Replying to: wisemoney (Aug 27, 2008 3:46 pm) Oh, I agree with you. $1,500-$2,500 is a poor deal. I would not advise anyone to pay that much. If that is the average, that shows my point that the advise Consumer Reports gives is not based on the typical buyers who read this forum and who get a much better price from online dealers like myhondawarranty.com and bernardiwarranty.com. If you had asked for advice on this forum before purchasing your Honda Fit extended care, I would've helped you get the best price I know of ($460) instead of $1,500- $2,000 that your dealer charged you. |
|
|
Replying to: mattgg1 (Aug 27, 2008 10:55 am)
|
|
|
Replying to: jet10000 (Aug 27, 2008 2:34 pm) "-83% is less than -50% hence displaying the correctness of my original statement, the less you pay the better your return." Thank you for proving my point! However you want to cut it, the "rate of return" on an EW is going to be NEGATIVE for the vast majority of buyers. So do you see how silly it to use rates of return and getting your money's worth as arguments for buying EWs? Your argument is...the online Honda EW is a great deal because you will likely lose 50% of your money instead of 83%. Do you use this same approach when managing your financial investments? Of course, -50% is better than -83%, but it is still huge loss, a horrible rate of return, and not a good financial strategy for anyone! You may want to pick investments that offer a positive return, instead of picking investments with the smallest negative return.
|
|
|
Replying to: mattgg1 (Aug 28, 2008 5:23 am) That wasn't my argument. You asked me to calculate the return rate on two given numbers because you didn't know the formula to do it. Some people get positive return rates from their Honda Care. I never said it was likely that someone would lose 50%. You may want to pick investments that offer a positive return, instead of picking investments with the smallest negative return. Honda Care is not an investment. It is a transfer of risk as was described earlier. You don't buy it expecting positive returns though you may get them. You're buying a service from someone else who will assume some of your risk. You admitted to buying disability insurance where you have seen regular -100% returns. I assure you I got a better return on my last Honda Care contract than that! Too many people falsely tout the "financial" benefits of an EW by claiming there is a good probability of recouping the EW cost from the vehicle repairs made under warranty. I've never seen anybody state that there is a good probability of recouping the EW cost from the warranty. Where is this being done? By whom? Please provide specifics. People state correctly that should something happen, you will be covered and they will absorb the risk. It's up to the individual consumer to judge whether the coverage is of value to them. Just like you judged the disability policy is of value to you even though you have a -100% return on it thus far.
|
|
|
Replying to: jet10000 (Aug 28, 2008 5:44 am) "Honda Care is not an investment. It is a transfer of risk as was described earlier. You don't buy it expecting positive returns though you may get them. You're buying a service from someone else who will assume some of your risk." "I've never seen anybody state that there is a good probability of recouping the EW cost from the warranty. Where is this being done? By whom? Please provide specifics." Here are just a few references that you and others have made... "On a car that I'm going to keep for the full term of the EW, I think it's a decent bet that it will either pay for itself or come close" - thebean Is this a specific enough example of someone claiming than there is a good probability of recouping the cost of an EW? "The people who read this forum, who buy Honda Care from an online dealer at a fair price are much more likely to get a better return on their Honda Care purchase than those that didn't seek out the best price" - jet10000 So when you mention getting a "better return", you simply meant that a buyer would get a smaller NEGATIVE return, right? If HondaCare is not an investment, and you can't expect positive returns, then why even discuss "returns"? "The likelihood that you would've gotten your money's worth from a Honda Care on your Fit is so much higher had you gotten the best price of $460 rather than the price you did pay after financing of nearly $2,000." - jet10000 Even at the best price of $460, buyers are still very unlikely to "get their money's worth". So you meant that buyers will LOSE less money when buying at a lower price, right? (Since as you said, you can't expect positive returns or recoup the warranty cost) I agree with you that EWs are not investments, that they are actually a payment to someone else for them to assume the risk of future repairs. Therefore, would you agree that any discussion of "rates of return", "recouping the EW costs" and "getting your money's worth" are not helpful?
|
|
|
|
|
Replying to: duke23 (Aug 27, 2008 8:43 pm) I'm not sure exactly what you mean by this, but if you are "aghast" that some people have an educated opinion against purchasing an EW then perhaps that's where you need to see if from a different perspective. I understand why people buy the EW - it's mainly due to risk aversion i.e. fear of the unknown, often brought on by a salesman who warns you about the risks ahead with expensive auto repair. I get that. I realize there are many stories of how the EW has paid off because breakdowns do occur. But even if you have had the need for that statisticly rare breakdown of your Honda, consider averaging it out over the ownership of other vehicles. It would be very bad luck to have consecutive EW's pay off. On the other hand it would be wise to just say no to an EW and do a good job of maintaining your Honda. Surely you can understand that statistics don't favor a positive payoff for the EW over your lifetime?? That's why the value, if you could call it that, is in comfort or peace of mind - not having repairs taken care of. |
|
You are here:
Forums
Smart Shopper Honda Extended Warranties Pricing and Info
New? Join Now!
Forum Tools
Search Forums
Browse by Vehicle
2011 Honda Odyssey
2010 Honda Accord
2011 Honda Civic
2010 Honda Element
2010 Honda Pilot
2009 Honda S2000
Browse by Board
Browse by Topic
Today's Chats
