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-   -   Is buying an extended warranty worth it? (https://www.bikeforums.net/general-cycling-discussion/952159-buying-extended-warranty-worth.html)

ocelotito 06-05-14 09:33 PM

Is buying an extended warranty worth it?
 
My husband went to pay an order my new bike (a Trek Shift 2) and was talked into buying something called a Trek Care Plus. With what he payed, I could have upgraded to a Shift 3! The bike has not been ordered yet (by the store) and I am sure that I could still cancel the extended warranty and upgrade. Has anyone here gotten that warranty? Used it? Thanks

syncro87 06-06-14 06:06 AM

Here is my take on extended warranties in general, not specific to bikes.

Some real smart people have sat down and analyzed the ins and outs of selling you such a contract.

Let's take new cars. A Honda Civic for example. The Honda dealer wants to sell you a Honda branded extended warranty.

A whole staff of actuaries set up the terms of the policy. They studied a gazillion years of past Civic repair history. They know, on average, approximately what things break and when they tend to break. They can predict with reasonable certainty that 3 of every thousand Civics will have an automatic transmission failure before 50,000 miles, for example. They can predict how often window regulators fail, how long lived your air conditioning compressor likely is. It's all about probabilities.

So, based on all this information that they've accumulated since they've sold Civics (decades), they know a lot. They then craft an extended service contract that assumes liability for certain things over a certain period of time. They then figure out, on average, what they are likely to shell out honoring that contract. Let's say for the sake of discussion the number is $500, on average, that they figure they will spend on repairs, per car.

So their wholesale cost is $500. They want to make a profit, of course, so they aren't going to sell that contract to their customer, the dealer (not you yet) for $500. They will sell it to the dealer for $800, using a totally hypothetical number.

The dealer gets the "warranty" for $800, their cost. The finance guy then prices it at $1500 to the customer. That way, he leaves himself or herself some wiggle room if someone is interested but needs a little haggling to get the deal done. He can sell it at $1200 and the client thinks they are getting a deal and he still makes money.

The key thing to remember in my little scenario is that on average, when you look at the 100,000 Civics sold in a year, the average car will require $500 in repairs under an extended service contract. So, even the $1200 price isn't a real good deal.

There are always the outliers. Sure, a few Civics will have a huge failure and need $3000 of work. Those few people will get over so to speak, since they only spend $1200 for the warranty agreement. Overall, though, the average car will consume less than $500 in services in this scenario.

Believe me, some intelligent people who have access to a lot of data set up the warranty or service contract to be a no-lose for them. The house structured the deal. It's like gambling in Vegas in a way. The odds are with the house. Sure, it's possible to beat them, but they aren't worried about the one guy in ten that does. They make enough off the other 9 guys to more than make up for that.

Bottom line: If they were paying more out in claims than they were taking in via premiums, they wouldn't be selling it.

If you buy an extended service agreement on something, realize up front that the only reason you're doing it is for peace of mind. You don't want to worry about it, and paying an inflated price buys you peace of mind. Logically, not much reason to buy one.

One last thing. The more complicated and expensive something is to fix, the more tempting it would be to cover your behind and get a longer warranty on something. A jet aircraft, for instance, or a CT scanner are really expensive to fix and take a high level of expertise. So you might think about it on that basis. A car is less sophisticated than a jet. A bicycle is far less sophisticated than a car or a jet. A toaster is less sophisticated than a bike. The point is, ask yourself what your loss is if something fails out of warranty. If something on my Boeing Dreamliner fails, I may not have cash to fix that $135,000 part laying around. A toaster...eh, I'll just get a new one for $35 if mine breaks.



Just my 2c.

cplager 06-06-14 06:44 AM

For a bike, I'd probably get the upgrade and skip the warranty (as the OP suggested). If the frame breaks, that's covered. If other pieces go, they aren't (generally) that expensive to replace...

WestPablo 06-06-14 06:51 AM

My Extended Warranty answer is always as follows:

No! If it breaks, I'll just buy a new and better one! :D

Upgrade to the Shift 3 and accept no other offers! :thumb:

ocelotito 06-06-14 09:49 AM

Thanks for the input. Even during my student years, when I commuted every day in my bike, and I was cheap and lazy to do any kind of maintenance, AND sustained some falls (not many) I never had to replace a single component on my bike. I'll try to get the upgrade.

wahoonc 06-07-14 06:56 AM

Short answer NO! I have never seen where an extended warranty has paid for itself. My daughter made the mistake of getting one for her laptop, when it crapped out just before the warranty ran out all they did was send her a new hard drive... she still had a old OS computer, IIRC the warranty was $200+ new hard drives cost $50... go figure.

Aaron :)

Looigi 06-07-14 08:02 AM

An extended warranty is a lot like insurance. The few that benefit do so at the expense of majority that never do. That's how the providers make money. The key is analyzing your situation and your ability to cover a loss. If your situation is one in that you're significantly more likely to benefit than average, it might make sense. Also, if you couldn't afford to cover the loss and it's something that's necessary or its loss intolerable, it may be prudent.

contango 06-07-14 08:12 AM


Originally Posted by syncro87 (Post 16826309)
Here is my take on extended warranties in general, not specific to bikes.

Some real smart people have sat down and analyzed the ins and outs of selling you such a contract.

(lots of numbers cut for brevity)

Bottom line: If they were paying more out in claims than they were taking in via premiums, they wouldn't be selling it.

If you buy an extended service agreement on something, realize up front that the only reason you're doing it is for peace of mind. You don't want to worry about it, and paying an inflated price buys you peace of mind. Logically, not much reason to buy one.

One last thing. The more complicated and expensive something is to fix, the more tempting it would be to cover your behind and get a longer warranty on something. A jet aircraft, for instance, or a CT scanner are really expensive to fix and take a high level of expertise. So you might think about it on that basis. A car is less sophisticated than a jet. A bicycle is far less sophisticated than a car or a jet. A toaster is less sophisticated than a bike. The point is, ask yourself what your loss is if something fails out of warranty. If something on my Boeing Dreamliner fails, I may not have cash to fix that $135,000 part laying around. A toaster...eh, I'll just get a new one for $35 if mine breaks.

I agree 100% with this post. On average you lose money on an extended warranty. The question you have to consider is whether you can afford to be unluckier than average.

I still remember the time I bought an ornament for 15.99 and the assistant offered me an insurance policy on it for "only 3.99". I thought she was joking - 25% of the price to replace it if I drop it? But she was serious, and when I declined she was clearly trying to scare me into relenting. She asked me what I'd do if I dropped it and broke it, and seemed unimpressed when I shrugged and said I'd chuck it in the trash and buy another one.

I tend to use the example of kitchen appliances. If you've got a cooker, fridge/freezer, chest freezer, washing machine, tumble drier, microwave oven and dishwasher, then instead of buying an extended warranty on everything just figure out how much the warranty costs and put that much in a sock (literal or metaphorical) every month. When one of your appliances needs repair or replacement, use the money in the sock to fund it. Chances are you'll come out ahead.

If you get spectacularly unlucky and everything fails at once you're badly out of pocket but the chances of that happening are miniscule.

Another consideration - if you can't afford to service the item you're buying if it does fail, ask whether you can really afford to be owning it in the first place. Also consider the standard of warranty you'd get with any new bike and whatever your local laws say about things being fit for purpose, and what the extended warranty offers over and above the standard.

jon c. 06-07-14 08:22 AM


Originally Posted by wahoonc (Post 16829446)
Short answer NO! I have never seen where an extended warranty has paid for itself.

Aaron :)

It's very rare, but it can happen. My dad got one on his pick up that had a fixed annual cost and no upper mileage limit. The company selling the policy has since rectified that actuarial error, but he's grandfathered in and with nearly 400K on the vehicle he gets a lot of good use out of that warranty.

wahoonc 06-07-14 02:19 PM


Originally Posted by jon c. (Post 16829585)
It's very rare, but it can happen. My dad got one on his pick up that had a fixed annual cost and no upper mileage limit. The company selling the policy has since rectified that actuarial error, but he's grandfathered in and with nearly 400K on the vehicle he gets a lot of good use out of that warranty.

that would be around .01% of the people that have purchased an extended warranty... What cracks me up is when they want to sell you a $10 warranty on a $20 item to extend the factory warranty. :rolleyes: That is nothing but pure profit for them, what is really sad is the number of people that say okay. :eek:


Aaron :)

JanMM 06-07-14 03:09 PM

The money saved by declining extended warranties can buy a lot of stuff.

Dave Horne 06-08-14 01:58 AM

Logically it makes sense not to buy an extended warranty. I only bought theft insurance for my new bike. (My frame is warranted for life.)

I know I could save some money on my health insurance over here by buying less coverage but for not much extra money we know we have excellent coverage and I never give it any thought.

If it makes your husband feel better by having an extended warranty, let him.

Exactly how much is that extended warranty?

wahoonc 06-08-14 05:22 AM


Originally Posted by JanMM (Post 16830308)
The money saved by declining extended warranties can buy a lot of stuff.

Amen! :thumb:

I had to fix my 12 year old washing machine a couple of months back. They offered me a 5 year extended warranty for $250 when I purchased it. The machine cost ~$1200 new, current replacement model is ~$1600. I spent less than $200 on the parts to fix it. Needed a new transmission. FWIW I called Sears (where it was purchased) and they wanted over $900 to repair it. :eek: I am glad I have the skill set to do things like appliance repairs.

Aaron :)

rydabent 06-08-14 07:45 AM

I would simply ask the salesman if the product a bike in this case, is so poorly built and poor quality that it needs an extended warranty. Then see what he says.

ocelotito 06-08-14 10:25 AM

The extended warranty was $90. The bike cost $499.


Originally Posted by Dave Horne (Post 16831296)
Logically it makes sense not to buy an extended warranty. I only bought theft insurance for my new bike. (My frame is warranted for life.)

I know I could save some money on my health insurance over here by buying less coverage but for not much extra money we know we have excellent coverage and I never give it any thought.

If it makes your husband feel better by having an extended warranty, let him.

Exactly how much is that extended warranty?


ocelotito 06-08-14 10:50 AM

It has been impossible to convince him. He thinks I want the upgrade because they have the Shift 3 in the store (as opposed to the Shift 2 in the warehouse) and that it's just to have it sooner:roflmao2:. I would have never thought of upgrading (even the Shift 2 is an upgrade from the Shift 1 I was originally considering) but, GIVEN that he decided to pay $90 more, I would have preferred to put that money into a better bike. Thanks for your replies.

raqball 06-08-14 10:58 AM

My .02

Cancel the extended warranty and either get the better bike or pocket the savings.

StephenH 06-08-14 01:06 PM

I agree with Syncro up there. The only time to buy an extended warranty (or insurance in general) is you cannot afford to pay to fix it if something does happen. Otherwise, if it's to the seller's advantage to sell you the warranty, it's to your advantage not to buy it.

BlazingPedals 06-08-14 01:42 PM


Originally Posted by WestPablo (Post 16826411)
My Extended Warranty answer is always as follows:

No! If it breaks, I'll just buy a new and better one! :D

Upgrade to the Shift 3 and accept no other offers! :thumb:

My answer to the question of insurance it so look at the sales person seriously and ask, "are you saying this product isn't reliable?" If it's reliable, I don't need an extra warranty. If it isn't reliable, maybe I need to look elsewhere.

fietsbob 06-08-14 01:47 PM

Trek Still stands behind the frame for the owners lifetime . everything else can be replaced.

MRT2 06-08-14 02:10 PM

Another vote for canceling the extended warranty, though it might be worth the money if it covered tuneups and adjustments for, say, 5 years. If it just extends to components and excludes tires and tubes, then it isn't worth it.

VegasTriker 06-08-14 03:00 PM

A lot of salesmen are being pressured into selling extended warranties because it is immensely profitable for the store. It never gets used by the customer so warranties can account for a big portion of the annual profit. It is so bad now that the store may fire a salesman who doesn't sucker enough customers to buy them. It is a poor rate of return compared to regular term life insurance that you would buy to protect your family.

I absolutely never buy extended warranties under any circumstances.

sarahbruce 06-08-14 04:13 PM

It seems that this Trek Care plus is not your average extended warranty. People have talked about this on some other forums and there are actually some good reviews. Apparently this covers all wear on original components and crash replacement.

From what it looks like, if you are going to put a decent amount of mileage on your new bike and are not going to upgrade the stock components, the Trek Care plus could work out in your favor. Not to mention the added peace of mind about crashes/damage.

Personally, I rarely buy bikes new, and even then I change/upgrade components constantly. So this warranty would be useless to me.
-Bruce

ocelotito 06-08-14 04:27 PM


Originally Posted by MRT2 (Post 16832462)
Another vote for canceling the extended warranty, though it might be worth the money if it covered tuneups and adjustments for, say, 5 years. If it just extends to components and excludes tires and tubes, then it isn't worth it.

Yes, I was actually looking for something covering regular tune-ups. I have a Specialized and I have lifetime free tune-ups, and it has been great. I was asking if they had something like that, even if it cost a bit more.

unabowler 06-08-14 04:37 PM

I'm not a fan of extended warranties. Manufactured products generally fail early in their life cycle due to production defects or late in their lifecycle due to wear out. Extended warranties usually cover the period in between where the failure rate is low.


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