I had a serious car accident today, and now what with my BRZ?

[Dr. BRZ]

Don't text and drive

[Dave-ROR]

Originally Posted by Dr. BRZ

Don't text and drive

Thanks for the PSA!

[Dave-ROR]

Originally Posted by extrashaky

False. An extended warranty purchased to cover the period after the manufacturer's warranty is most definitely a type of insurance. You pay another entity to assume part or all of your risk of mechanical failure. That's the very definition of insurance regardless of the likelihood of making a claim.

And my chances of recovering from my extended warranty are 100% -- twice. First with an engine replacement, then again with an oil leak. The probability of an event that has already happened is always 100%.

What confuses people about extended warranties is the terminology. A warranty is a legal promise that a product will meet certain criteria, along with an agreement to provide relief if it doesn't. Subaru warranties that your engine will last 60K miles and agrees to fix it if it doesn't. There's no transfer of risk, because the risk was Subaru's from the beginning.

The extended "warranty" really isn't a warranty, because Subaru never intended to promise that the engine would make it to 100K miles. Instead, they're now agreeing to accept your risk that it won't last that long in exchange for premium. That transfer of risk from the consumer to the manufacturer in exchange for consideration makes it insurance.

I work in the real estate title insurance business. Our agents perform a search of your home's title to make sure there's no problem with it before they will issue you a title insurance policy. Because they simply won't issue the policy if there's a problem, the likelihood that you will ever need to make a claim is very small, statistically near zero. That doesn't make it a warranty. The likelihood of the insured event occurring, however small, doesn't prevent it from being insurance.

I don't think he was saying it wasn't "insurance" just that the likelyhood of needing it is small.

Possible, yes. In your case, clearly so. In many others, maybe not. In the last 20 some years I've never bought a car where the extended warranty would have paid off so far. Clearly for some they work out but for most I'd guess that it's a waste of money on any reliable brand.

[extrashaky]

Originally Posted by Dave-ROR

I don't think he was saying it wasn't "insurance" just that the likelyhood of needing it is small.

Possible, yes. In your case, clearly so. In many others, maybe not. In the last 20 some years I've never bought a car where the extended warranty would have paid off so far. Clearly for some they work out but for most I'd guess that it's a waste of money on any reliable brand.

My overarching point is that it's a risk estimate that is unique to each person, and therefore it's irresponsible to tell people they're foolish to buy the warranty when nobody has any idea what others' risk appetite or profile is.

For me the impact of mechanical failure was pretty large even though the likelihood was small. Additionally, when I bought my 2014 there were too few examples with any significant miles on them to reveal any potential issues with the platform. That made the uncertainty a lot greater than if the car had a decade long track record of going 400K miles with no problems. Even now I don't think there are enough high mileage examples on the road to adequately judge the reliability of the car.

So for me the extended warranty was relatively cheap insurance on a capital investment that I would have considered a good risk even if I hadn't needed to use it.

[spagti]

Originally Posted by Dr. BRZ

Don't text and drive

Yeah that's irresponsible.

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[Dadhawk]

Originally Posted by extrashaky

False......

As @Dave-ROR pointed out, I wasn't saying extended warranties weren't a form of insurance, I was saying it isn't mitigating much real risk, at least for me. Of course others may have differing opinions and level of risks.

This is how it applies FOR me.

Extended warranties on anything electronic or other household goods provides no value. Most of these devices, if they are going to break, will do so within the manufacturer's warranty. If it does so after the warranty, I'd just as soon buy the newest/latest/greatest version anyway.

For autos, every car (new/used/new model/old model) I've ever owned has gone past the manufacturer's and the extended warranty period with no issue that cost more than what an extended warranty would have cost me. Because of that, I am willing to foot the bill should my next one break in the gap between manufacturer's warranty and the limits of an extended warranty.

IN MY CASE, an extended warranty isn't buying me much time anyway. On the FRS it would have at most covered an additional 24 months of driving.

Things that would cause me an unreasonable financial burden if lost, I insure. I also don't buy things I can't afford to do maintenance and repairs on. An extended warranty is "repair insurance" so in my case not needed.

Also, we differ in that I don't consider a vehicle a capital investment, it is a consumable like food or clothing. Maybe that is the real difference.

[MrProa]

Ah man! I know how you feel. I had a similar accident with my '17 BRZ. Looked very similar and total repair bill was $14,500, no bent frame. Strip it and make a track car! Buy a used corolla or civic for a daily.

[wparsons]

Everyone claiming that self insurance is better financially obviously hasn't had to go to court after an accident. Hurt someone bad in a crash (including yourself) and you'll be paying far more than what insurance premiums for life would have cost you.

Even forgetting that, if you have a good financial planner (or smart with investments on your own) it's a bad financial decision unless insurance is insane where you are.

If you have to keep $40k/car liquid enough to get at any time that's $40k you can't have invested anywhere. Invest that $40k and you can be making more than what insurance would cost you every year. Even a 5% annual return is more than enough to cover my insurance, and that's not a fantastic return.

Same argument against buying cars in cash. If the interest rate on the loan is less than what I'm making on the investment where the money currently resides the loan makes way more sense.

[p1l0t]

Originally Posted by wparsons

Everyone claiming that self insurance is better financially obviously hasn't had to go to court after an accident. Hurt someone bad in a crash (including yourself) and you'll be paying far more than what insurance premiums for life would have cost you.

Even forgetting that, if you have a good financial planner (or smart with investments on your own) it's a bad financial decision unless insurance is insane where you are.

If you have to keep $40k/car liquid enough to get at any time that's $40k you can't have invested anywhere. Invest that $40k and you can be making more than what insurance would cost you every year. Even a 5% annual return is more than enough to cover my insurance, and that's not a fantastic return.

Same argument against buying cars in cash. If the interest rate on the loan is less than what I'm making on the investment where the money currently resides the loan makes way more sense.

I somewhat agree with this. Although lately I have been just paying my mortgage down because 4.25% guaranteed is just easier than stressing out all year to make a slightly better 6% in stocks. I'm also really busy flying jets now though and I do have lots of insurance just because I don't have the money to self insure anyway. I think if I had a cool mil sitting around though paying an insurance company may not be worth it. I mean you could still make interest on that money while not paying the insurance company. Plus thinking about diversification it's not a bad call since you can always start insurance whenever and use the money for something else. 99% of the people on this forum, myself included, I don't think are in a position to self insure anyway. It's not worth it if you have EXACTLY $40k but if you have $400k cash in your asset pool of $4 mil using 10% to self insure might not be terrible while it sits in a (low) interest generating account. That's a different world than most people live in though. Most of the people I know who have the money to self insure don't drive much themselves anyway. They have some fancy cars but don't really use them much.

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[wparsons]

If anything, the ultra rich are less likely to leave money sitting around when it could be making them more money. That's how they got to be ultra rich in the first place (forgetting anyone born into it and just handed millions).

[Grady]

Originally Posted by Dadhawk

I don't consider a vehicle a capital investment, it is a consumable like food or clothing. Maybe that is the real difference.

Exactly! The car you drive and the house you live in is not an investment. it is a cost!

[Tcoat]

Originally Posted by Grady

Exactly! The car you drive and the house you live in is not an investment. it is a cost!

The house you live in is an investment as it is expected to rise in value. Unfortunately this doesn’t always work out so it is a bad investment but an investment all the same.

[Will BRZ]

Originally Posted by Grady

Exactly! The car you drive and the house you live in is not an investment. it is a cost!

I never understood why people think cars are investments. I think mostly non car enthusiasts have this mentality. I love driving my car and not once does it cross my mind that it's depreciating in value with every mile. It's cool if it's like your weekend car or whatever, but to deliberately not drive it out of fear of not making a profit is kinda dumb.

Houses can be investments. People literally make a living out of "flipping houses" lol but cars are definitely costs. I'd rather have fun and drive the shit out of it and make great memories with it rather than get an extra grand when trade in time comes.

[p1l0t]

Originally Posted by Will BRZ

I never understood why people think cars are investments. I think mostly non car enthusiasts have this mentality. I love driving my car and not once does it cross my mind that it's depreciating in value with every mile. It's cool if it's like your weekend car or whatever, but to deliberately not drive it out of fear of not making a profit is kinda dumb.

Houses can be investments. People literally make a living out of "flipping houses" lol but cars are definitely costs. I'd rather have fun and drive the shit out of it and make great memories with it rather than get an extra grand when trade in time comes.

If someone gave me a Lamborghini tomorrow it would still get like 10k mi a year on it until I couldn't afford to repair it anymore.

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