Extended warranties are like any other form of insurance. You send the company money. They send you a piece of paper. The paper is a promise to pay you money if/when you have a claim. For each dollar you send them, on average, expect about 50 cents in return. Not a good investment. The remaining 50 cents pays for G & A, broker and agents commissions and fees, claims adjusting expense and last but not least, profit.
If I could find a company that only sold insurance with a minimum deductible of $1,000, I would buy it in a heartbeat. If anyone knows of an insurer that underwrites on that basis, please let me know.
The problem is most consumers want their cake and they want to eat it as well. That's works better for the insurance company. They simply charge more money. And of course, they make more money.
Normally I pass on warranties. But after my 3 month old F250 died in Death Valley a few years ago and it was necessary to flat bed tow it to Las Vegas, I reconsidered my decision. Of course that was after I started researching the problematic Ford 6 liter diesel. Still I question the wisdom of buying warranties. My Ford warranty, the best in terms of coverage, has one very significant weakness. It has very limited towing. In my case, it pays up to $100.00 I wonder what it cost to tow my truck from Scotty's Castle in Death Valley to Las Vegas. That was about 175 miles. I'm guessing it was a bit more than $100.00. So is it worth it. Not yet.
So far I've paid $4,500 for six years worth of protection. In the 4 years since I purchased the first policy, I've had two claims. The first was under the original 100,000 mile drive train warranty. The second, a rear differential seal was less than $100.00. Still, theirs always the chance I could blow the engine. Then I would be looking at maybe $10,000 worth of repairs. If I renew the warranty in two years, I'm sure my total warranty premium will be upwards of $8,000. Almost the price of a major repair.
Now if I put that money in the bank along with the money I saved by not buying computer, cell phone, televisions, major appliance and home warranty policies, I'd certainly be on the plus side of the ledger. Actually I bought a warranty on my Imac 4 years ago. It gave me an additional two years protection. If only it was two years and 3 months. It cost $159.00. The hard drive went 3 months out of warranty. It cost me $125.00 for the new hard drive plus the software to recover my data from the failed drive. Now I'm thinking of buying an extended service contract for my wife's MacBook Air. That's $259.00 for two years. Of course, the logic board went after four months. I hear that's a big ticket item so I'm thinking maybe. Still, when I add everything up, it gets to be a sizable amount of money.