But it's not, insurance is about mitigating risk, people prefer an upfront known cost and in general should expect to lose out overall, but accept that it's the price for piece of mind.
Warrantywise
- Thread starter Scuzi
- Start date
Absolutely true. But you don't go and pay say £5k a year to cover that M5 engine do you? Simply because it smooths your outlays?
My last paragraph in previous post is the primary motivation for insurance and the smoothing of expenses is an added benefit but it is marginal imo other than for very expensive items.
The idea is a famous problem in economics except the application is something being bought rather than here (where insurance companies face the problem when selling).
https://en.m.wikipedia.org/wiki/The_Market_for_Lemons
https://en.m.wikipedia.org/wiki/Adverse_selection
https://en.m.wikipedia.org/wiki/The_Market_for_Lemons
https://en.m.wikipedia.org/wiki/Adverse_selection
No, I probably wouldn't have the car if that was required. I'd also not drive the car knowing that at any point it could present me with a random £40k bill, or even £15k bill for an engine rebuild. A £1k policy though, I can happily pay, knowing that I'm probably losing out on overall, but it lets me enjoy the car for a relatively small % of the overall cost of ownership. The same thing scales down to any car though, paying a known few hundred a year to insure against a possible bigger bill on any car is worth it if you can't easily find an unspecified amount without notice, which is a common situation.
It doesn't scale down. That was what my post was saying. I drive a £12k car, I won't be buying warranty insurance as I know my expected cost is lower than what a warranty company is assuming and at that bracket I can self insure (with an M5 that would indeed be different).
Thats why I took it all the way down to mobile phone insurance. I have had expensive £300-£500 phones for 10+ years. Not once would I have had to claim and I knew that was most likely. So the people that buy mobile phone insurance on average will be worse risks than me and insurance companies know that the people that buy it will be worse and charge accordingly. That means even if I wanted to buy mobile phone insurance (to smooth outlays) I won't get a fair price.
Thats why I took it all the way down to mobile phone insurance. I have had expensive £300-£500 phones for 10+ years. Not once would I have had to claim and I knew that was most likely. So the people that buy mobile phone insurance on average will be worse risks than me and insurance companies know that the people that buy it will be worse and charge accordingly. That means even if I wanted to buy mobile phone insurance (to smooth outlays) I won't get a fair price.
I disagree - I still think a reasonable warranty has value even on a cheaper car. I've got a 3 year dealer arranged warranty with http://www.theautogroup.co.uk/Car_Warranty.aspx on my 2012 Focus, bought last year. It cost me £299 including 3 "free" MOTs. Within the 18 months I've had the car, I've already had one claim on it (for a reverse switch), which would otherwise have cost me £67. Hopefully I won't need to make another claim on it, but it would only take another claim and it would essentially have paid for itself (or better depending on what needed to be claimed for).
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You have to assess really how much of a problem self selection is. Warranties attached to sales probably aren't that risky as the car is probably actually in good shape, especially if it is approved used.
It is very different to say someone going to warrantywise and asking for a warranty because they think the car will have niggles.
It is also why it is cheaper if you get a warranty soon after you purchase it or if it directly follows a manufacturer warranty (and you continue it). You aren't as likely to be a self selecting group of bad risks.
Is it worth it then? Up to you but, self selection whilst reduced still is a problem and the company still has to cover expenses and make a profit.
It is very different to say someone going to warrantywise and asking for a warranty because they think the car will have niggles.
It is also why it is cheaper if you get a warranty soon after you purchase it or if it directly follows a manufacturer warranty (and you continue it). You aren't as likely to be a self selecting group of bad risks.
Is it worth it then? Up to you but, self selection whilst reduced still is a problem and the company still has to cover expenses and make a profit.
The examples aren't equivalent though, cars can and do go wrong without warning or you being at fault, phone insurance in most circumstances would be paying out due to some sort of negligence on your part.
You must also be able to afford the repair bills on your car and be happy with that risk, which is great for you, but many people wouldn't be able to afford the risk of having to throw away £12k of car, which is why paying a few hundred upfront to avoid that is preferable. A lot of people would be able to shrug off my potential £40k bill too, that doesn't mean it's not a good idea for me to pay for the warranty does it?
Don't you see that I am probably someone that is less likely than average to require the warranty. So if you are like me, then you are being lumped with everyone else and charged accordingly subsidising them.
With lower value cars this is far more likely to happen.
Obviously if you can't self insure that is different, but I'm sure a lot of people can.
That is why insurance products like this have so many limitations and they rigidly follow them. It is the only way they will make a profit (or rather an acceptable level of profit after expenses).
With lower value cars this is far more likely to happen.
Obviously if you can't self insure that is different, but I'm sure a lot of people can.
That is why insurance products like this have so many limitations and they rigidly follow them. It is the only way they will make a profit (or rather an acceptable level of profit after expenses).
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You're just as likely as anyone to have a random problem with a car, the only time when your thinking works is for people buying cars with known issues and trying to get the warranty company to pay for a fix. I'm not saying that doesn't happen, but it has to be a small minority, most policies are just people wanting to protect themselves against the unknown. I wouldn't bother with a warranty if I knew that I could easily pay for any repair my cars ever needed, but I know that's not the case, and that's the thinking behind most warranty purchases. Don't forget, the terms attached to these warranty policies pretty much force you to keep the car in good condition and well serviced, so it's not a case of being able to pay the warranty and then be neglectful.
Had a warrantywise cover with a mini cooper s I picked up for Mrs cheesyboy. It came with the car.
I got payment towards new tyres when I had to replace three of them. Claim went in from the tyre guy for two with nails in. I expected them to pay a proportion based on how much tread was left (as per terms and conditions), but they actually paid more than the price of two tyres. Couldn't figure out what they based the payment on, but was happy.
They refused to pay for an entire new passenger seat, at a cost if nearly a grand, which the mini main dealer reckoned was necessary to get the seat adjustment working. Also refused an electric window motor, which I never believed to be faulty (pretty sure it was a switch issue: was intermittent in any case, so not much of a worry). Got rid of the motor soon after, so these issues were left unsorted. would never buy a car from this particular mini dealer, though: just couldn't trust the ********
I got payment towards new tyres when I had to replace three of them. Claim went in from the tyre guy for two with nails in. I expected them to pay a proportion based on how much tread was left (as per terms and conditions), but they actually paid more than the price of two tyres. Couldn't figure out what they based the payment on, but was happy.
They refused to pay for an entire new passenger seat, at a cost if nearly a grand, which the mini main dealer reckoned was necessary to get the seat adjustment working. Also refused an electric window motor, which I never believed to be faulty (pretty sure it was a switch issue: was intermittent in any case, so not much of a worry). Got rid of the motor soon after, so these issues were left unsorted. would never buy a car from this particular mini dealer, though: just couldn't trust the ********
I bought the car with the expectation that it would throw up the occasional bill of around a grand. However, a recent conversation with a distant family member who is an ex-Mercedes mechanic has made me consider a warranty. He said I was "****ing stupid" not to have one on an R class 
An occasional big bill would be acceptable and expected but a few in quick succession or a big bill like a lunched engine would be an unwanted inconvenience. He suggested either was quite likely in his experience.
An occasional big bill would be acceptable and expected but a few in quick succession or a big bill like a lunched engine would be an unwanted inconvenience. He suggested either was quite likely in his experience.
If I were you, I'd try and get the Mercedes approved warranty. One thing to check though is the claim limit, I know the BMW claim limit is the price you paid for the car, so it's possible that any warranty might not cover the bills you're trying to avoid.I bought the car with the expectation that it would throw up the occasional bill of around a grand. However, a recent conversation with a distant family member who is an ex-Mercedes mechanic has made me consider a warranty. He said I was "****ing stupid" not to have one on an R class
An occasional big bill would be acceptable and expected but a few in quick succession or a big bill like a lunched engine would be an unwanted inconvenience. He suggested either was quite likely in his experience.
I was offered a WarrantyWise warranty by a dealer when looking at a car (they give you 6 months to cover themselves with an option to pay for more), but they said the single claim limit was £5k, which is ridiculous even for the cheaper cars they have. At the time, I was sitting in an office next to the Carrera GT they had priced up at £599k
You are correct in that most people aren't out to fraudulently claim.
But even just say 10% of people claiming 100% of the time plus 90% of people claiming 10% of the time means that more than half of all claims are fraudulent. Okay it may not be as high as 10% but they skew everything massively.
(Then there are all the non-fraudulent people who might know their car is likely to develop faults. But we'll ignore them for now).
A small proportion buy these warranties after their car develops multiple faults. Then put in a claim after the time exclusion runs out. The insurance company can't tell these 10% of fradulent customers and 90% of genuine customers apart. The 90% are also massively overpaying because of the 10% as they are all charged the same price (because they all look the same).
That is the problem that these companies face. They can get around it by looking for good customers, so for example people that have just bought a car (few people will deliberately buy a lemon from a dealer) or have their existing warranty about to expire (the car shouldn't have known faults).
But even just say 10% of people claiming 100% of the time plus 90% of people claiming 10% of the time means that more than half of all claims are fraudulent. Okay it may not be as high as 10% but they skew everything massively.
(Then there are all the non-fraudulent people who might know their car is likely to develop faults. But we'll ignore them for now).
A small proportion buy these warranties after their car develops multiple faults. Then put in a claim after the time exclusion runs out. The insurance company can't tell these 10% of fradulent customers and 90% of genuine customers apart. The 90% are also massively overpaying because of the 10% as they are all charged the same price (because they all look the same).
That is the problem that these companies face. They can get around it by looking for good customers, so for example people that have just bought a car (few people will deliberately buy a lemon from a dealer) or have their existing warranty about to expire (the car shouldn't have known faults).
If I were you, I'd try and get the Mercedes approved warranty. One thing to check though is the claim limit, I know the BMW claim limit is the price you paid for the car, so it's possible that any warranty might not cover the bills you're trying to avoid.
I was offered a WarrantyWise warranty by a dealer when looking at a car (they give you 6 months to cover themselves with an option to pay for more), but they said the single claim limit was £5k, which is ridiculous even for the cheaper cars they have. At the time, I was sitting in an office next to the Carrera GT they had priced up at £599k
5k isn't enough to cover an engine swap in most cars, even old ones. That is the kind of thing they hope a warranty will cover, but nope.
Genuine warranty or don't bother and put the money aside to pay for claims. I've been stung in the past by warranty direct and they use the exclusions to exempt and awful lot of claims. Personally although I have the BMW warranty now if I purchase newish again I wont bother and will put the money into an account for use on repairs if needed. If you have genuine service history there is normally an element of goodwill BMW can contribute towards expensive repairs (I would assume Mercedes are the same).