The first thing to know about any car warranty is that it’s basically a bet.
But is it a good one . . . for you?
The issuer is like the guy running the baccarat table at The Sands in Vegas. He is wagering that you’ll definitely pay him – and that he probably won’t have to pay you.
He’s not the mark, in other words.
You are.
Warranties aren’t randomly selected time and mileage intervals. Those time and mileage intervals are based on extensive in-house durability testing of the vehicle – and meticulous cost-benefit analysis.
The “house” is betting that the warranted vehicle won’t need more than the usual maintenance-related things while the warranty is in effect. That’s how money’s made, you see.
It is always possible something will go wrong, of course. And it’s actually likely that something will go wrong. Nothing made by man is any more perfect than the men who made it.
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But the odds are it won’t be a big thing that goes wrong.
And no matter what goes wrong, you’ve already paid for it anyway.
It’s just a question of how much.
The car manufacturers do a lot of heavy math. Whatever the car’s sticker price is, it includes the potential cost of the most-likely big-ticket repairs that would be covered under warranty – factored out over what it charges for all the cars it sells.
If the manufacturer has to pay out some money to a dealership to fix your car, that cost has already been spread out over what it charged everyone who bought a car. It’s a business, remember.
The new car warranty only seems free.
It’s also why aftermarket or extended warranties – the post-warranty warranty coverage often offered with used vehicles – almost always cost obviously extra.
