Reader Question: Extended Service Plans?

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Here’s the latest reader question, along with my reply!

Alan asks:  I have a 2012 Audi A6 with only 45,000 miles on it. Audi is offering a 4-year service plan for $5,314. I only drive it around 3,000 mile per year, hence the 45k miles after almost 10 years. Last year I had to replace the engine mounts & water pump. I went to an independent shop & got those done for about $1,500. Just wondering what you think about these plans for high-end vehicles with all their computer systems that can break, etc.  At least it’s a 2012 so it does not have many of the new horrible features. I’m thinking it’s not worth it. The gamble is will I incur more than $5k of repairs in the next four years? And I can afford it if I have to make repairs and have an independent shop that charges about half what the dealer charges. Any thoughts?

My reply: Due diligence is the first order of business with regard to these extended warranties; as in – read the fine print. Closely. Some – not all, but some – are hardly worth the paper they are written on, with all kinds of exclusions and limitations designed to make sure the issuer never pays, but that you do.

A factory-backed extended warranty is usually more legitimate but – even so – I agree with you that it’s probably not worth it, especially in view of the car’s low miles and light use. I think it is unlikely your car will develop a $5,300 problem over say the next ten years, by which time you will have accrued not even 80,000 miles at the current rate and that is hardly broken in for a modern car. You ought to be able to go at least 120,000 before the car develops an expensive problem and even that becomes less likely if you are scrupulous about maintenance and treat the car well.

I would consider setting aside the $5,300 for just-in-case rather than spending it on “coverage” for a $5,300 repair that will probably never need to be made. If it does need to be made, you will have the $5,300 to pay for the repair. If not, you will have the $5,300.

These warranties are fundamentally a gamble – and the odds always favor the house, which would not gamble with its money if the odds weren’t in its favor.

Now, some people value the psychological security of being “covered” – and that may be worth something to you. It all comes down to how comfortable you are running a risk, as well as your evaluation of the degree of that risk!

. . .

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  1. A water pump and engine mounts failed at 45k miles? Are they made of cheese? I agree with your mechanic. Sell that car and put that $5300 toward a toyota/honda/mazda.

    • It’s crazy isn’t it. Why would engine mounts start leaking after only 45k miles just because it is eight years old? The other problem is they were only leaking. They hadn’t really failed yet. So I probably could have kept driving forever on them. Even the Audi service guy said I didn’t really need to replace them unless the engine started vibrating and shaking. So I probably was overly anal about it. Whatever. I totally agree with you re Toyota, Honda & Mazda. Problem now is finding a good used car.

  2. Thanks Eric for this thorough analysis. I was leaning towards not buying it and you make the pros and cons very clear. Especially considering the ridiculously low annual miles I drive. The only freak out was I was rather disappointed that the engine mounts and water pump went out after 8 years. But as you say, if I don’t buy this plan, I have $5,300 I can spend on repairs in the next four years and still break even. My best mechanic of all time (and a fellow non-masker), when I had a Camry for 20 years, refuses to work on Audis and told me not to buy it or if I do buy it, he said to sell it before the factory warranty expires. He basically now works only on older Porches and all things Lexus/Toyota. But he did refer me to a little kind of run down looking independent foreign car place that does Audis & they charged half what the dealer wanted for the pump and engine mounts. And, by the way, they don’t do the face diapers over there. So I’m moving my annual service work over to that little shack populated by non-maskers. Sad to leave the fancy dealer waiting room with the free coffee and snacks, but $3,000 for a pump & engine mounts? No way. Also, I can no longer take my friend’s advice to sell my Audi for a newer car because at least my 2012 Audi gives only two or three half hearted beeps about my seat belt before giving up and going quiet. And it does not turn off at stop lights thank God. And Audi has announced they are going all electric by 2030 or so. So I guess I’m with this Audi for the duration as I am already age 69. Thanks again for the advice.


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