From: dab@vuse.vanderbilt.edu (The Nashville Flash)
Subject: Re: Extended Warranty
Originator: dab@space3
Organization: Vanderbilt University School of Engineering, Nashville, TN, USA
Date: Fri, 17 Apr 1992 13:37:33 GMT

>In article 11742@advansoft.com, eparker@advansoft.com (Eric Parker) writes:
>>My local friendly Harley dealer wants me to buy an extended
>>warranty for my bike. He claims I have to do it before the
>>original warranty expires. 

In article <smi5dINN6di@sixgun.East.Sun.COM> egreen@East.Sun.COM writes:
>What is an extended warranty?  A wager between two parties.  
[excellent stuff about statistical production variations deleted]
>ie, conforms to his specs, quality, etc.  At this point, he *knows* how
>long the bike will last.  An *extended* warranty is not a safety net
>for the manufacturer, it is a chance to make money, by making a wager
>with the customer concerning the performance of the product... *his*
>product.  He knows it better than you.

TO THE BUYER, an extended warranty is a form of insurance.  The buyer says 
to himself, when buying ANY kind of insurance, "How screwed will I be if I 
need this and don't have it compared to how screwed I am by paying this 
money for something I don't need?"  I submit to you that extended warranties 
are the worst deal around insurance-wise.  For a few hundred dollars a year 
(under a hundred in Tennessee) you get tens of thousands, if not hundreds of 
thousands of dollars of liability insurance for your vehicle.  For a few 
hundred dollars a year you can insure your home and its contents for (in the 
neighborhood of) a hundred thousand dollars.  These are the kinds of 
insurance that most people feel are a "must" because of their cost/benefit 
ratio in conjunction with the "fuck factor" of not having them.  ALL 
insurance is a lose-lose proposition for the buyer.  If you buy it and 
don't need it, then you threw your money away.  If you buy it and do need 
it, then you have already "suffered a loss" and getting a claim paid is 
going to be another bad experience.  The only thing worse is having NOT 
bought it and needing it.

Now consider the extended warranty.  Ed is right about the manufacturer
coming to the table with ALL the numbers stacking the deck on his side.  How 
much IS the extended warranty?  What does it cover?  In the absolute worst 
case, you would recoup the cost of a new motorcycle.  Figure your 
cost/benefit ratio.  You plop down, what, $300 on the chance of collecting
$6000?  20:1 MAXIMUM return. My guess is that you would be a lot better off 
to take the money and either put it in the bank as a reserve against needing 
repairs or spend it all on lottery tickets.  Spending it on lottery tickets 
gives you about the same chance, statistically, of "winning" with your 
gambling dollar, but the payoff will be MUCH higher.

Myself, I laugh at extended warranties.  But then, I laugh at the cost of
comprehensive/collision coverage, too.  If I end up having a loss under
one of these policies I DIDN'T buy, I will consider the sum of money that
I HAVEN'T SPENT over the last 20 years or so on insurance as the reserve
upon which I am drawing.  Right now I estimate that reserve at $20,000.00.
============================================================================
 "No hour of life is lost that is spent in the saddle." - Winston Churchill
    The Nashville Flash	  -   dab@vuse.vanderbilt.edu   -   DoD # 412