Originally Posted by sokoloff
Just keep in mind that the warranty company will ALWAYS win in the long run, whether it's by going out of businiess or by paying out less in claims than they take in. The typical customer would be much better off setting aside that money for repairs in his/her own bank account. Now if you feel better about spending that money for what may or may not be peace of mind, that another issue.
I did a lot of research on this back in 2000 and a couple of things came up. Most of the companies make their money based on the fact that newer cars do NOT have major mechanical issues so they get much of their ROI on Toyota/Honda/Lexus/Acura etc. Second, they sell a warranty that goes to 100K miles however most folks trade their car before then and , unless it is a private party sell, the warranty is not transferred by the dealer that took in the trade.
As for the viability of the warranties, all you need is an ignition module or throttle body or transmission to go awry for the warranty to pay for itself. On a BMW that my wife drove, a bearing in the rear diff went out which costs $1,500 to repair. She paid $100. The warranty had cost $1,200.
My shop mainly does restoration and performance work and a partner shop does most general repair but more and more people are using these insurance based warranties as the cost of repair is so much.
Back in February a $50 upper oil pan gasket let go on one of my 500Es. Now if I had not had a shop to do the work myself the part would have been only $50.00 but the 25 book hours required to pull the motor to get to that piece would have been a $$$ hit.