Aftermarket Warranty

[TinCanSailor]

Looking for tips and advice. I don't have any reason to think the car is going to fail but I am considering getting an aftermarket warranty for my new to me 2015 M6 GC. Hope some of you might have some market research or experience that can help jump start me. Thanks in advance.

[Opie55]

You could search and there are several detailed threads on this. I'm in the "I never buy warranties on anything ever" camp, so I can't offer you any research or suggestions.

[MMMM6GC]

Originally Posted by TinCanSailor

Looking for tips and advice. I don't have any reason to think the car is going to fail but I am considering getting an aftermarket warranty for my new to me 2015 M6 GC. Hope some of you might have some market research or experience that can help jump start me. Thanks in advance.

I made a post on this last month on the M6 part of the forum. Lots of data points - check it out

[ezmaass]

Originally Posted by TinCanSailor

Looking for tips and advice. I don't have any reason to think the car is going to fail but I am considering getting an aftermarket warranty for my new to me 2015 M6 GC. Hope some of you might have some market research or experience that can help jump start me. Thanks in advance.

I've had very good luck with my BMWs over the years - never took out an extended warranty. It's essentially a numbers game. If the warranty company is doing their job, the premiums will need to be larger than the payouts, on average. That said, "average" is the operative word - some will absolutely get their money's worth, while (many) more will likely never see their value.

If you've ever traded options on the market, it's very much a similar concept - most options expire worthless or get traded (to unwind) at a loss. This is why options sellers, who are akin to the insurers, often walk away winners more often than options buyers, who are akin to the insureds.

That said, sometimes insurance (or warranties) do pay off. It's about understanding the math and risks better than the insurer. That's a tall order in many cases, especially where there's plenty of data available to the actuaries and a lot less available to you!

But it CAN make sense. My R8 is the first car I've purchased an extended warranty on in my life. I know the cars well, including lots of great sources of data on what often fails, how much it costs, etc. One of the most popular failures is the magnetic ride shocks. Each costs ~$2k in parts, alone, or about $8k for all four. They're almost guaranteed to fail after 5 or 6 years. In my case, I was able to get a 10 year / 100k mile warranty for far less than the replacement cost of just the shocks, and I was also able to obtain it in an exclusionary warranty that included coverage for shocks. So, it was a no-brainer on that alone. After I started adding in other popular failures, failure rates, and costs, it was MORE than a no-brainer.

Roughly a year after I purchased that warranty, folks are now being quoted close to double what I paid - in some cases even more - for the exact same warranty with very like situations (year, mileage, etc.). This is simply, in my eyes, the insurance / warranty company's data finally catching up and prices being adjusted to account for their payouts.

In the case of the R8, it's low production volume, and being a member of a tightly knit community, it may very well be viable to have more comprehensive data than a random warranty company / underwriter who typically deals in volume and just may not insure / warranty enough of these cars to gain similar perspective. So, it may be possible, in some of those scenarios, to beat the insurer at the numbers game.

How to know if you're getting a good deal? Well, I think you'd need to approach it like the actuary - similar to how a company does a risk quantification analysis. The FAIR model is one such approach - if you want to take the time to dig into it. But basically you're translating risks (along with expected losses, annual loss expectancy, etc.) into quantitative financial terms. If you can get someone to sell you a policy that covers that risk for less than your own internal carrying costs, then you buy the warranty. If not, then you self insure. Deciding whether to self insure or purchase insurance on certain corporate risks is something a CISO, CRO, and CFO routinely collaborate on... but the same process can be applied to smaller scopes, such as a car warranty.

So, long story short, whether it makes sense or not: "it depends." You need to have very good data and a handle on the "inputs" to your risk model to be able to begin calculating what your risks translate to in terms of financial losses over some period of time. The easy part is then comparing your risk carrying costs, as I mentioned, to that of a quoted policy premium.

But very much like a casino, or my previous analogy to the options markets, beating "the house" is extremely difficult. If the actuaries are doing their job correctly, the odds are not in your favor. The longer the car has been around, the more of them they've written policies on, the better their data is, and the less likely it is that you'll beat them on a pure numbers game. That leaves only the possibility that you happen to own a car which has a standard deviation (or more) of additional costs over the life of the policy, and therefore you "win" simply due to an out-sized set of repairs... not something you'd hope for, in any case.

If you do choose to buy a policy, Fidelity's Platinum policy has a decent reputation. I'm not sure if BMW underwrites their own plans, but you may want to check with them - in some cases, it may help ease the claim process if that's the case. Lastly, I'd say to look for an exclusionary warranty, which calls out what's excluded (in hopefully a short list) versus the typical budget warranties that list a finite number of parts / repairs that are covered - these are the plans that typically surprise the owner with many uncovered expenses.

[TinCanSailor]

Originally Posted by ezmaass

I've had very good luck with my BMWs over the years - never took out an extended warranty. It's essentially a numbers game. If the warranty company is doing their job, the premiums will need to be larger than the payouts, on average. That said, "average" is the operative word - some will absolutely get their money's worth, while (many) more will likely never see their value.

If you've ever traded options on the market, it's very much a similar concept - most options expire worthless or get traded (to unwind) at a loss. This is why options sellers, who are akin to the insurers, often walk away winners more often than options buyers, who are akin to the insureds.

That said, sometimes insurance (or warranties) do pay off. It's about understanding the math and risks better than the insurer. That's a tall order in many cases, especially where there's plenty of data available to the actuaries and a lot less available to you!

But it CAN make sense. My R8 is the first car I've purchased an extended warranty on in my life. I know the cars well, including lots of great sources of data on what often fails, how much it costs, etc. One of the most popular failures is the magnetic ride shocks. Each costs ~$2k in parts, alone, or about $8k for all four. They're almost guaranteed to fail after 5 or 6 years. In my case, I was able to get a 10 year / 100k mile warranty for far less than the replacement cost of just the shocks, and I was also able to obtain it in an exclusionary warranty that included coverage for shocks. So, it was a no-brainer on that alone. After I started adding in other popular failures, failure rates, and costs, it was MORE than a no-brainer.

Roughly a year after I purchased that warranty, folks are now being quoted close to double what I paid - in some cases even more - for the exact same warranty with very like situations (year, mileage, etc.). This is simply, in my eyes, the insurance / warranty company's data finally catching up and prices being adjusted to account for their payouts.

In the case of the R8, it's low production volume, and being a member of a tightly knit community, it may very well be viable to have more comprehensive data than a random warranty company / underwriter who typically deals in volume and just may not insure / warranty enough of these cars to gain similar perspective. So, it may be possible, in some of those scenarios, to beat the insurer at the numbers game.

How to know if you're getting a good deal? Well, I think you'd need to approach it like the actuary - similar to how a company does a risk quantification analysis. The FAIR model is one such approach - if you want to take the time to dig into it. But basically you're translating risks (along with expected losses, annual loss expectancy, etc.) into quantitative financial terms. If you can get someone to sell you a policy that covers that risk for less than your own internal carrying costs, then you buy the warranty. If not, then you self insure. Deciding whether to self insure or purchase insurance on certain corporate risks is something a CISO, CRO, and CFO routinely collaborate on... but the same process can be applied to smaller scopes, such as a car warranty.

So, long story short, whether it makes sense or not: "it depends." You need to have very good data and a handle on the "inputs" to your risk model to be able to begin calculating what your risks translate to in terms of financial losses over some period of time. The easy part is then comparing your risk carrying costs, as I mentioned, to that of a quoted policy premium.

But very much like a casino, or my previous analogy to the options markets, beating "the house" is extremely difficult. If the actuaries are doing their job correctly, the odds are not in your favor. The longer the car has been around, the more of them they've written policies on, the better their data is, and the less likely it is that you'll beat them on a pure numbers game. That leaves only the possibility that you happen to own a car which has a standard deviation (or more) of additional costs over the life of the policy, and therefore you "win" simply due to an out-sized set of repairs... not something you'd hope for, in any case.

If you do choose to buy a policy, Fidelity's Platinum policy has a decent reputation. I'm not sure if BMW underwrites their own plans, but you may want to check with them - in some cases, it may help ease the claim process if that's the case. Lastly, I'd say to look for an exclusionary warranty, which calls out what's excluded (in hopefully a short list) versus the typical budget warranties that list a finite number of parts / repairs that are covered - these are the plans that typically surprise the owner with many uncovered expenses.

Great analogy on the options trading. I have an appointment for an oil change at the dealership where the prev owner bought the car and I plan on returning there with this one but my wife's 5 is at another dealer and may speak with the sales rep there that we bought her's from but my major goal is to try for a copy of the old service records and to see what they like when working with insurers.

I've been very fortunate with past cars and have rarely ever used the aftermarket service policy on the last 3 cars I bought and ended up getting a refund of the remaining balance. If I can get a good feel on the PO's maint efforts I may skip on this purchase and use the money for donkeys and balloons

[Derekz4]

That is one thing I did request before purchasing my CPO. I asked to see the cars complete history with its service and warranty claims.
Not sure how much they will provide you after the fact.

I would also ask my independent repair shop if there is a particular company they recommend.

[MMMM6GC]

Originally Posted by ezmaass

I've had very good luck with my BMWs over the years - never took out an extended warranty. It's essentially a numbers game. If the warranty company is doing their job, the premiums will need to be larger than the payouts, on average. That said, "average" is the operative word - some will absolutely get their money's worth, while (many) more will likely never see their value.

If you've ever traded options on the market, it's very much a similar concept - most options expire worthless or get traded (to unwind) at a loss. This is why options sellers, who are akin to the insurers, often walk away winners more often than options buyers, who are akin to the insureds.

That said, sometimes insurance (or warranties) do pay off. It's about understanding the math and risks better than the insurer. That's a tall order in many cases, especially where there's plenty of data available to the actuaries and a lot less available to you!

But it CAN make sense. My R8 is the first car I've purchased an extended warranty on in my life. I know the cars well, including lots of great sources of data on what often fails, how much it costs, etc. One of the most popular failures is the magnetic ride shocks. Each costs ~$2k in parts, alone, or about $8k for all four. They're almost guaranteed to fail after 5 or 6 years. In my case, I was able to get a 10 year / 100k mile warranty for far less than the replacement cost of just the shocks, and I was also able to obtain it in an exclusionary warranty that included coverage for shocks. So, it was a no-brainer on that alone. After I started adding in other popular failures, failure rates, and costs, it was MORE than a no-brainer.

Roughly a year after I purchased that warranty, folks are now being quoted close to double what I paid - in some cases even more - for the exact same warranty with very like situations (year, mileage, etc.). This is simply, in my eyes, the insurance / warranty company's data finally catching up and prices being adjusted to account for their payouts.

In the case of the R8, it's low production volume, and being a member of a tightly knit community, it may very well be viable to have more comprehensive data than a random warranty company / underwriter who typically deals in volume and just may not insure / warranty enough of these cars to gain similar perspective. So, it may be possible, in some of those scenarios, to beat the insurer at the numbers game.

How to know if you're getting a good deal? Well, I think you'd need to approach it like the actuary - similar to how a company does a risk quantification analysis. The FAIR model is one such approach - if you want to take the time to dig into it. But basically you're translating risks (along with expected losses, annual loss expectancy, etc.) into quantitative financial terms. If you can get someone to sell you a policy that covers that risk for less than your own internal carrying costs, then you buy the warranty. If not, then you self insure. Deciding whether to self insure or purchase insurance on certain corporate risks is something a CISO, CRO, and CFO routinely collaborate on... but the same process can be applied to smaller scopes, such as a car warranty.

So, long story short, whether it makes sense or not: "it depends." You need to have very good data and a handle on the "inputs" to your risk model to be able to begin calculating what your risks translate to in terms of financial losses over some period of time. The easy part is then comparing your risk carrying costs, as I mentioned, to that of a quoted policy premium.

But very much like a casino, or my previous analogy to the options markets, beating "the house" is extremely difficult. If the actuaries are doing their job correctly, the odds are not in your favor. The longer the car has been around, the more of them they've written policies on, the better their data is, and the less likely it is that you'll beat them on a pure numbers game. That leaves only the possibility that you happen to own a car which has a standard deviation (or more) of additional costs over the life of the policy, and therefore you "win" simply due to an out-sized set of repairs... not something you'd hope for, in any case.

If you do choose to buy a policy, Fidelity's Platinum policy has a decent reputation. I'm not sure if BMW underwrites their own plans, but you may want to check with them - in some cases, it may help ease the claim process if that's the case. Lastly, I'd say to look for an exclusionary warranty, which calls out what's excluded (in hopefully a short list) versus the typical budget warranties that list a finite number of parts / repairs that are covered - these are the plans that typically surprise the owner with many uncovered expenses.

Excellent analogy and one I totally subscribe to. I spent time researching the M6 (on this forum especially) and talking to people who owned/serviced these cars. I also factored in the age/mileage of my particular car and I came up with a figure I was comfortable spending on a warranty. I consider the warranty as breakdown insurance, and for that I was willing to spend up to $1.5k p/y. Any more that, I would instead look to invest the money and cross my fingers that over the course of my ownership I would come out even/ahead.

As an FYI, I've already come across an issue which is likely an $800+ repair at a dealership, or around 50% of my $1.5k annual budget. This arose within the first few months of ownership. For a vehicle with a $150k+ MSRP, 1% p/y for comprehensive mechanical coverage is to be expected, in my eyes.

Time will tell whether I chose the right approach, especially when it comes to seeing how the warranty company behaves when paying out for repairs.

Originally Posted by TinCanSailor

Great analogy on the options trading. I have an appointment for an oil change at the dealership where the prev owner bought the car and I plan on returning there with this one but my wife's 5 is at another dealer and may speak with the sales rep there that we bought her's from but my major goal is to try for a copy of the old service records and to see what they like when working with insurers.

I've been very fortunate with past cars and have rarely ever used the aftermarket service policy on the last 3 cars I bought and ended up getting a refund of the remaining balance. If I can get a good feel on the PO's maint efforts I may skip on this purchase and use the money for donkeys and balloons

Glad you found my data points thread useful bud. FYI speaking to my dealer and being comfortable that they had a history of successfully working with a particular warranty company was a key factor in deciding who I went with. I would recommend you speak to both the sales managers at dealers you're familiar with, and also the SA's. Quick anecdote; at one dealership, the SA was honest enough to let me know which warranty companies they had 0 issues with paying out claims. Ironically, the warranty sold by their dealership sucked with claims, and he actively told me to avoid the sales department and go elsewhere. It's worth speaking to the guys on the front-lines in the service department too!

[jwillson80]

I recently purchased a 2014 650 GC Xdrive with 35K miles. Did some research online plus contacted a friend of mine who is a Service Adviser at my local BMW dealer and he recommended Endurance. Comprehensive coverage at a decent price. Plus you can pay monthly with no finance charge. Definitely worth a call.

[MMMM6GC]

Originally Posted by jwillson80

I recently purchased a 2014 650 GC Xdrive with 35K miles. Did some research online plus contacted a friend of mine who is a Service Adviser at my local BMW dealer and he recommended Endurance. Comprehensive coverage at a decent price. Plus you can pay monthly with no finance charge. Definitely worth a call.

Ultimately this is the best approach and what I ended up going with - work with your SA. If he has had good experience with Endurance and he'll be maintaining your car, then you'll be in good hands.