drdread said:
The details r in the contract. when u purchase a new car the extended warranty will go into effect after factory expires. from an actuarial risk it's a new car & the money u will invest will have grown sev fold by the time ur factory expires. So think of it as 4 yrs fur them to make $ off of u w/o any risk of claim.
once u use vehicle it no longer qualifies as new after i think 6 or 12 mos & to mitigate their risk & not lower their profit (& risk) they then charge higher premium & make the terms immediate.
It's the ol' time vale of money mixed w a risk ratio.
Not to disagree too much with Dr. Dread, but just to clarify a little. Right now, if they use your money for 4 years, they'll get about .5% more return than you will with a CD. That means if the cost is $2,000 you would have about $2,210 at the end of four years (high paying 4 year CD is 2.5%). The insurance company might have $2,250 (2.5% +.5%). Remember, they can't risk the money because they have an actuarial risk after the four years. So, for the four years they "make $ off of u w/o any risk of claim" of $40 - and then they do have a big risk of claim.
I'm a very pro-business person... If you're in *any* business or work for a business your trying "to make $ off of u". It's called profit. In fact you *WANT* the warranty company to make a profit. If they don't, then they go out of business and the warranty is worthless. If their profit is big, then other people want to make the big profits and get into the business, which then reduces the profits again (Ah, the joys of the free market).
So, is it worth $40 or even $100 to buy it now? I can't make that judgement for you. But don't bash warranty companies (or any company) for wanting to make a profit. Bash them for not following their contract when the don't? ABSOLUTELY! That's called fraud, and I'm well against that!!