Any thoughts on gap and mechanical breakdown coverages?

[CaptainCrud]

My badlands should be at the dealer any day now and I'm in the process of sealing the deal with my credit union. At the last minute they've offered me some additional coverages. I am one of those people that almost habitually declines that type of thing on any product purchase. But this is a big purchase for me so I figured I would see if any of you fine folks have more experience with this stuff and may want to weigh in.

First is gap coverage, which would protect me if the amount I owe on the loan is ever greater than the value of the vehicle. I'm doing a large down payment and a 60 month term, so I can't imagine ever owing more than the vehicle is worth. So I'm thinking I'll decline this unless there is anything else I'm missing about gap.

Mechanical breakdown coverage. This covers cost of repair of major (non-accident) mechanical failures that may not be a warranty repair for whatever reason. I know this is a gamble, cuz it really only works if you have a mechanical failure where the cost of repair exceeds the cost of the plan plus any deductible. Who can possibly know if that will occur?? Just curious if anyone has experience or thoughts on this type of coverage. Would it just be better to consider an extended warranty from Ford and decline this?

As always, thank you all for the knowledge.

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[MJE]

I always refuse the gap coverage on any loan. My figuring is if I ever get in a situation I can’t pay the loan off, the car is collateral, I don’t need insurance to pay it off, they can have the car back. My loan will be much the same as yours when mine gets here, 60mo max and down payment, so I don’t see the use of it. Where I do take the coverage is in my car insurance, so if it gets written off, they pay you the value of a new vehicle, not a depreciated one. That to me is worthwhile for that adder.

The mechanical breakdown one does sound basically like an extended warranty. The last time I bought a car I took this from the dealer, despite it being a 3rd party, something I never thought I’d do but the circumstances. This time around I plan to take their extended warranty again, if they can credit me back for the unused portion (all of it) of my last one to go towards the next one. If not, I know I wasted thousands last time then & will refuse this coverage again based solely on budget.

I can see some value in this where everything in the car nowadays turns it into an expensive to repair rolling computer. But at the end of the day? They wouldn’t push this coverage/warranty if it wasn’t highly profitable, and for it to be profitable they need to pay out less in repairs than they collect in premiums. So at the end of the day you have to expect to pay more for the coverage than if you’d just set aside money for repairs. As always the best advice is probably to be self insured.

 

[Mark S.]

Mechanical breakdown coverage. This covers cost of repair of major (non-accident) mechanical failures that may not be a warranty repair for whatever reason.

More specifics please. Your basic warranty covers the vehicle bumper-to-bumper (except for consumables like tires, oil, brake pads, etc.) for the first 36K/3yr. After that the powertrain is covered for 60k/5yr. Are they offering you an extended warranty?

 

[Benanza]

Gap is only really needed if your insurance company doesn't have replacement value. The language on the insurance policy for total loss is extremely important. Currently the value of the BS for resale is higher than most paid has caused some issues as to replacement value and adjusted value. Currently there is value above what you pay after it gets titled unlike most vehicles, until that changes gap would be pointless.

Side note, If you are leasing you better make sure you have gap insurance. Most leases do not discount for early payoff.

 

[CaptainCrud]

The product they are offering is called Assure Guard Auto from Revolos. Info about it is here:
Assure Guard Auto

It sounds like it is basically an insurance plan for mechanical problems.

If the Ford warranty covers bumper to bumper for first 3 years, seems redundant and wasteful to have this type of coverage, at least until that runs out. I do believe the bank said I could add this later if I wanted.

I will decline the gap coverage. I am purchasing, not leasing.

I did email my Ford guy to see what they have available for extended warranty options. He's a friend so I know he won't try to sell me garbage.

Thanks for all the great advice so far!

 

[SportWest]

(1) I decline gap coverage
(2) Look into proper mechanical breakdown insurance (MBI) from GEICO and other insurers. I wrote about MBI pros and cons here.

The price of MBI should also make you realize the margins on Flood ESP, to say nothing of the even more expensive dealership ones. GEICO underwriters know what they're doing, and my Big Bend MBI amounted to ~$600 for 7 years/100k miles, and I paid on it every six months instead of up front or bundled with the loan.

 

[CaptainCrud]

(1) I decline gap coverage
(2) Look into proper mechanical breakdown insurance (MBI) from GEICO and other insurers. I wrote about MBI pros and cons here.

The price of MBI should also make you realize the margins on Flood ESP, to say nothing of the even more expensive dealership ones. GEICO underwriters know what they're doing, and my Big Bend MBI amounted to ~$600 for 7 years/100k miles, and I paid on it every six months instead of up front or bundled with the loan.

very helpful info, thank you. So if one was to go with MBI, would it make sense to decline this initially while the vehicle is under bumper to bumper warranty and add it later when that is expired, or add MBI from the start?

 

[Benanza]

You can purchase the Ford ESP online at a steep discount.

 

[CaptainCrud]

You can purchase the Ford ESP online at a steep discount.

This is very good to know. My Ford guy just told me that his dealership sells a ton of third party warranties and that he quietly tells all his friends and family to avoid them and only buy a Ford ESP because they tend to be more affordable, the dealership makes less money, and he trusts them more.

 

[SportWest]

very helpful info, thank you. So if one was to go with MBI, would it make sense to decline this initially while the vehicle is under bumper to bumper warranty and add it later when that is expired, or add MBI from the start?

Depends on your insurer's policy. GEICO requires you sign up for MBI before a certain number of months and miles, which means you're double-covered between MBI and bumper-to-bumper for a spell. That period certainly helps GEICO's bottom line.

The only coverage options I'd consider are Ford ESP purchased online or MBI from a car insurer. Third-party warranties like from a credit union are probably **** and also unnecessary given your other options.

 

[CaptainCrud]

The only coverage options I'd consider are Ford ESP purchased online or MBI from a car insurer. Third-party warranties like from a credit union are probably **** and also unnecessary given your other options.

Nice, this is exactly the kind of info I'm looking for. Thank you all very much, this thread is super helpful for me!

 

[Rgill]

IF you want, get the Ford ESP online where it is cheaper rather than your dealer. That covers you from year 3 on. This is only if you want. But you do not have to purchase it on day 1 as you have bumper to bumper for 3 years and power train longer. Personally I have never ever ever bought gap or extended warranty and I have owned a ton of vehicles. That includes vehicles with 10 years and 100K miles on them and still never got extended warrenty. Instead once out of warrenty I take it to a good regular mechanic who has decent repair costs and stop going to the dealership. This is IMHO

 

[Benanza]

This is very good to know. My Ford guy just told me that his dealership sells a ton of third party warranties and that he quietly tells all his friends and family to avoid them and only buy a Ford ESP because they tend to be more affordable, the dealership makes less money, and he trusts them more.

That's my feeling exactly... First warranty the guy mentioned when doing paperwork was from Toyota, why would you want me taking a Ford to Toyota. People buy cars while having service and they might lose business. So weird!
I got mine online, plus an extra discount for repeat customer too. I added windows and lights once I saw the $2k light replacement tag

 

[Rgill]

That's my feeling exactly... First warranty the guy mentioned when doing paperwork was from Toyota, why would you want me taking a Ford to Toyota. People buy cars while having service and they might lose business. So weird!
I got mine online, plus an extra discount for repeat customer too. I added windows and lights once I saw the $2k light replacement tag

Odd question, when have you ever had to replace your full light housing on a car unless in an accident when insurance would cover it? If they are going to fail they would in the first couple years. Same thing with windows. Usually only busted in accident or theft attempt which insurance would cover.

 

[CaptainCrud]

IF you want, get the Ford ESP online where it is cheaper rather than your dealer. That covers you from year 3 on. This is only if you want. But you do not have to purchase it on day 1 as you have bumper to bumper for 3 years and power train longer. Personally I have never ever ever bought gap or extended warranty and I have owned a ton of vehicles. That includes vehicles with 10 years and 100K miles on them and still never got extended warrenty. Instead once out of warrenty I take it to a good regular mechanic who has decent repair costs and stop going to the dealership. This is IMHO

This is exactly what I did with my last vehicle, but it was a 2005 and was pretty basic. This is going to be my first computer car.

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