Off topic. Mercedes new car extended warranty, Worth it??? Options

[daytona]

Hi,
As the tittle implies, does anyone have any information/experience with the Mercedes Benz new car extended warranty?
We just took delivery of a new E 450 4matic. The dealership is offering what I consider is a good price for the extended warranty, ad since we tend to keep our cars a long time I think it may be worth buying.
I had a bad experience with extended warranty on a new Cayman S but it was a third party warranty. This is one is actually offered by MB. I just want to know if someone here ever had to make use of it and what that experience was like.
Thanks,
Bill.

[Superhawk996]

Hi,
As the tittle implies, does anyone have any information/experience with the Mercedes Benz new car extended warranty?
We just took delivery of a new E 450 4matic. The dealership is offering what I consider is a good price for the extended warranty, ad since we tend to keep our cars a long time I think it may be worth buying.
I had a bad experience with extended warranty on a new Cayman S but it was a third party warranty. This is one is actually offered by MB. I just want to know if someone here ever had to make use of it and what that experience was like.
Thanks,
Bill.

IMHO, as a generalization extended warranties are a losing proposition for you, the customer. You should self insure for out of warranty expenses.

Here's the way the extended warranty business works. An extended warranty is basically an insurance product.

On the AVERAGE, the company has to take in more money than it pays out in claims, otherwise they go bankrupt.

Believe me, the extended warranty company knows far more about the rate of payout on any given model than you do. In this case, Mercedes themselves. I assure you Mercedes knows what the mean time to failure is for every major component of it's vehicles. It is their business. They have to know the odds on AVERAGE of any given claim payout or they fail. They have to know that any given car model that they will incur LESS in warranty costs on AVERAGE than they made on the sales or they will LOSE MONEY. Major OEM's like Mercedes don't lose money willy nilly to warranty. When warranty work becomes too costly, they redesign the part to cut their losses. An extended warrantly just moves that tipping point a little further out, but I assure you, Mercedes knows what they anticipate the costs to be on the AVERAGE.

The extended warranty buyer on the other hand is speculating based on their gut. They have a FEAR that something will go wrong with their SPECIFIC car that they can't afford to pay for out of pocket. If you KNEW,for sure, that something is going to go wrong, and that you will be in need of an extended warranty, then you should be asking why you're buying that product in the first place. I.e. German cars have a proven history of being expensive to mainain after they are long out of warranty (by this I mean 5-10 years out). This is why you can buy a 2007 BMW 750Li for only $10K. It's because your next repair may be $1.5-$3K and everyone knows and understands that risk and adjusts the purchase price accordingly for that risk. There is no extended warraty that will cover this far out for a resonable price, because the actual repair prices are so high, and because the actual rate of failure is relatively high at that point in time.

So for about every $100 dollars they take in from the AVERAGE customer on the warranty cost, they will pay out about $12 of claims. The other $88 goes to overhead like office space, office supplies (furniture, printers, paper, etc.) paying commissions to the warranty salesman, marketing materials to get you in the door, administration costs, and most importantly, thier PROFIT Margin. It is a business plain and simple. Nothing evil about it, but, the odds are tipped in their favor. They exist to make money, if they don't make a profit, they don't exist.

How do I know this?

First, when I used to work retail electronics the commissions I got paid for selling extended warranties by far surpassed the comission I'd earn off just selling the product.

Second, how the insurance industry (and extended warranties are only insurance) business model works isn't a secret. All insurance bascially works this way be it car insurance, health insurance (excepting non-profits - few & far between), electronics extended warnties, or even things like propane or fuel oil "insurance" for home heating where they lock in pricing early in the season. In the case of health insurance, it is a relatively good buy. I cannot afford to self insure my way though a $250k heart surgery. The annual premium I pay for health insurance IS a reasonably good buy to insure myself against a risk I CANNOT afford to cover myself that would bankrupt me if it were to occur. So I'm not anti-insurance, I'm just not in favor or paying someone to insure what I CAN insure against for myself. If I had a net worth of $10M, in theory I wouldn't need to be bothered with health insurance. At that point I could self insure. See where this is headed?

Third, I work in automotive. I know and understand the rate of failure on the components that I work on. It's my job. That information gets shared with the internal and external extended warranty companies.

I will challenge you to do your research, verify what I've laid out, and, then decide for yourself based on the knowlege and the statistics of what IS likely to happen (based on reliability of the car under consideration) and not just a FEAR of what might happen.