- Joined
- Nov 3, 2020
- Posts
- 197
- Reaction score
- 300
- Location
- Northern New England
- Ram Year
- 2021 Limited
- Engine
- Hemi 5.7
Extended warranties are always a gamble.
Basically, you're paying upfront for repairs that may never happen. For example, the 8 Year/100,000 Miles $0 deducible Mopar Maximum Care warranty currently costs $3,365 for a 2021 RAM 1500 with under 12,000 miles.
So, in order for it to pay off, you would have to incur more than $3,365 in repairs from year 3 to 8 for the basic portion and from year 5 to 8 for the powertrain portion, or until you exceed 100,000 miles, whichever comes first.
More than $3,365 in repairs may or may not happen in this time frame, especially now that FCA reduced the maximum warranty period to only 8 years (which is why they did that). Keep in mind that FCA knows from years and years of carefully recorded data precisely what all the repairs from all the extended warranties will cost them and then adds a sizable profit. This means that the majority of extended warranty purchasers will not receive a payout greater than the cost of the warranty. It doesn't matter which term plan or deductible you choose, FCA precisely calculates the price for each to ensure that they always make a sizable profit overall.
For the minority of those who do receive back more than they paid, they'll be very happy and recommend these warranties to everyone. For the majority who lost money on them, they'll be pissed off and are likely to keep this bad experience to themselves. No one brags about losing money.
So, it's a gamble, and just like real gambling, the house always wins. That's what makes both casinos and extended warranties a very profitable business for the owners but a considerable risk for the customers.
I'm not telling anyone not to buy one, I'm just trying to convey what the actual odds are. There is still a chance that it may pay off for you, especially if you drive your truck hard, pull a trailer, or do anything else that might wear the vehicle out faster. The old 12 year and lifetime warranties were a much better bet, which is exactly why you can't get them anymore.
Basically, you're paying upfront for repairs that may never happen. For example, the 8 Year/100,000 Miles $0 deducible Mopar Maximum Care warranty currently costs $3,365 for a 2021 RAM 1500 with under 12,000 miles.
So, in order for it to pay off, you would have to incur more than $3,365 in repairs from year 3 to 8 for the basic portion and from year 5 to 8 for the powertrain portion, or until you exceed 100,000 miles, whichever comes first.
More than $3,365 in repairs may or may not happen in this time frame, especially now that FCA reduced the maximum warranty period to only 8 years (which is why they did that). Keep in mind that FCA knows from years and years of carefully recorded data precisely what all the repairs from all the extended warranties will cost them and then adds a sizable profit. This means that the majority of extended warranty purchasers will not receive a payout greater than the cost of the warranty. It doesn't matter which term plan or deductible you choose, FCA precisely calculates the price for each to ensure that they always make a sizable profit overall.
For the minority of those who do receive back more than they paid, they'll be very happy and recommend these warranties to everyone. For the majority who lost money on them, they'll be pissed off and are likely to keep this bad experience to themselves. No one brags about losing money.
So, it's a gamble, and just like real gambling, the house always wins. That's what makes both casinos and extended warranties a very profitable business for the owners but a considerable risk for the customers.
I'm not telling anyone not to buy one, I'm just trying to convey what the actual odds are. There is still a chance that it may pay off for you, especially if you drive your truck hard, pull a trailer, or do anything else that might wear the vehicle out faster. The old 12 year and lifetime warranties were a much better bet, which is exactly why you can't get them anymore.
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