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April 20, 2014

Consumer Reports: Extended warranties an expensive gamble

(Continued)

RELIABILITY AND SATISFACTION

When Consumer Reports asked car owners whose extended warranties had taken effect how satisfied they were with their experiences, the most satisfied were primarily owners of less-reliable brands, including BMW, Chrysler, Dodge and Mercedes-Benz. Those are all brands that have had average or below-average reliability in its Annual Auto Survey. Interestingly, some of these brands also had the most expensive extended warranties, with Mercedes-Benz owners paying $2,200 on average, followed by BMW owners, at $2,007, and Chrysler owners, at $1,525.

The reason for those owners’ higher satisfaction may be that they tended to use the coverage more often than owners of cars from historically reliable brands. That probably helps consumers feel more justified about having spent money for the coverage — a bittersweet way to rationalize the purchase.

Conversely, owners of Hondas, Subarus and Toyotas — perennially high-ranking brands for reliability — were among the least satisfied overall with their extended warranties. They were also far less likely to have used them, compared with owners of most other brands’ models. Just 39 percent of Honda and Toyota owners reported having used their coverage, followed by only 36 percent of Subaru owners. Not surprisingly, owners of those brands were among the least likely to say they’d definitely purchase the coverage again; less than a quarter of policyholders for each make said they would do so.

Instead of buying the warranty, Consumer Reports recommends investing that $1,200 in an interest-bearing account. That way, you’ll have an emergency fund if a post-warranty problem arises. And if your car doesn’t need pricey repairs, you’ll already have the money for a down payment on your next car.

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