Any thoughts on gap and mechanical breakdown coverages?

[Pinski66]

I bought a Ranger in August. I ended up buying the ford premium care esp through zeigler ford. They were cheapest at the time. They offer a $250.00 discount if you dont use their financing. The esp showed up on my ford pass the next day. I will check flood, zeigler, lombard, and anderson & koch for the wife's BS. I dont know if its worth it but it gives me piece of mind. I would say no on gap insurance if you are buying with a good down payment. I will pass on all the other extras they offer.

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[jake4042]

Auto dealerships and/or lenders may try to sell you what they call gap insurance, but it's not actual insurance. What auto dealerships commonly offer is most likely a debt waiver agreement they advertise as gap insurance. However, there are significant differences between these two products.

Debt waiver agreements sold at a dealership are often overpriced, and you can't cancel or return it if you pay down your auto loan quickly and build equity. A gap insurance endorsement, however, usually only raises your premium slightly, and you can cancel it if you put yourself in an equitable situation with your auto loan.

It's a good idea to ask your insurer about gap insurance options before you shop for a new vehicle or motorhome so you can compare their insurance products against what the auto dealer will offer. Your insurance company may never mention gap insurance or offer it to you, but they must sell it to you if you ask.

 

[Benanza]

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.

It was just a $100 add for 6 yrs. If any of the led goes out you have to replace the whole unit. Plus there's a cooling fan, who knows how long that will last. Now that I have an issue where the lights sometimes stay on, I'm dam glad I have it.

 

[sajohnson]

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.

Exactly right!

All insurance, extended warranties, etc, are "betting against the house". When possible, it's best to be self insured, because the house always wins -- which means the vast majority of people are 'losers' who pay in more than they get back.

 

[sajohnson]

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.

Good points!

 

[Mark S.]

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.

This is the way.

Everything on the car is covered by the warranty for the first 36k/3yr. Assume you make it two years before hitting 36k. Put $50 a month into a savings account for 24 months and you have a $1200 emergency car repair fund when the basic warranty expires. Assume you make it another 18 months before the 60k powertrain warranty expires and you now have a $2100 emergency repair fund. Keep saving until the fund is as big as you like. If you never use it you have a nice down payment on your next car, or you simply keep it as your forever emergency car repair fund.

 

[CaptainCrud]

This is the way.

Everything on the car is covered by the warranty for the first 36k/3yr. Assume you make it two years before hitting 36k. Put $50 a month into a savings account for 24 months and you have a $1200 emergency car repair fund when the basic warranty expires. Assume you make it another 18 months before the 60k powertrain warranty expires and you now have a $2100 emergency repair fund. Keep saving until the fund is as big as you like. If you never use it you have a nice down payment on your next car, or you simply keep it as your forever emergency car repair fund.

Yeah I'll probably just end up doing something like this. I do the exact same thing saving money for future vet bills instead of paying for pet insurance.

Thanks for the great advice everyone!

 

[SportWest]

Yeah I'll probably just end up doing something like this. I do the exact same thing saving money for future vet bills instead of paying for pet insurance.

Not a bad bet. Since GEICO profitably underwrites their Bronco Sport MBI at $600-700.00 for 100k miles/7 years with a $250.00 deductable, it gives you a better idea of the 'odds' involved compared to Ford warranties IMHO.

 

[oneminddoc]

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.

Skip the GAP given you are doing a down payment and ONLY get a FORD ESP Extended Warranty. You have not idea if the third party insurers will even be around in 3-5 years. Look at Flood Ford ESP online. I have had numerous ESP contracts through them and they have always beaten the dealer's price by 40-60%

 

[sajohnson]

This is the way.

Everything on the car is covered by the warranty for the first 36k/3yr. Assume you make it two years before hitting 36k. Put $50 a month into a savings account for 24 months and you have a $1200 emergency car repair fund when the basic warranty expires. Assume you make it another 18 months before the 60k powertrain warranty expires and you now have a $2100 emergency repair fund. Keep saving until the fund is as big as you like. If you never use it you have a nice down payment on your next car, or you simply keep it as your forever emergency car repair fund.

Great post! That is absolutely the best way to go.

All insurance and extended warranties are gambling -- 'betting against the house'. The house (underwriter) always wins. The vast majority of people pay in far more than they get back. Of course we don't hear from them. No one brags about how they paid $2,000 for a warranty and never had a claim greater than the deductible. The ones who are likely to talk are the rare "winners". People hear those stories and think <Homer Simpson> "How can I lose?!"

Most people have no choice but to purchase: homeowner's; health; and auto insurance -- because the potential losses are so great. In all cases where it is affordable though, it's much better to be self-insured.

That said, there are occasional exceptions. The underwriter works with averages. They obviously can't know each customer's specific situation. So, for example, say someone lives near construction sites, and is always getting flat tires. In that case, it probably makes sense for them to pay for "road hazard insurance" -- even though for most people it is almost certainly a waste of money.

The only other reason to purchase an extended warranty is 'peace of mind'. Some people would rather pay X amount up front -- even though logically they know it does not make sense -- because they like the idea that any repair bills will be limited to that amount, plus deductibles.

 

[Wolf256]

If you’re a Costco member, there is an extended warranty offered through them.

 

[cgparsons1983]

I usually get the GAP coverage. For my last car from Carmax that I bought in 2018 and sold a few months ago, I still got back over $1100.

 

[sajohnson]

If you’re a Costco member, there is an extended warranty offered through them.

Costco is great! My wife and I have been members for years.

I was going to buy the BS BL through the Costco Auto program, but the closest participating Ford dealer is over an hour away near D.C. -- and that's without traffic (there's always traffic). The next closest as in TN! So we did not get to the point of checking out any Costco auto warranties.

The only insurance worth getting is for potentially catastrophic losses -- life; health; home; auto (collision, comp, etc.); and/or maybe disability. There are exceptions, but generally speaking, extended warranties are a bad deal. There are some buyers who are "winners" -- and they are often very vocal, but there are a lot more losers (who generally keep quiet). Big box stores like Best Buy make more from extended warranties than they do from the products they sell.

That said, for most purchases, Costco doubles the mfr warranty (up to 2 years total), and the CITI VISA card also has its own warranty that adds an additional 2 years (up to 7 max) -- however it's unclear if the total for Costco + VISA = 3 or 4 years, because the 2 year VISA warranty starts when the *mfr's* warranty expires.

In any case, a typical purchase of (say) a TV or laptop computer will result in at least 3 years coverage, and maybe 4 -- for FREE -- plus lifetime US-based tech support, and a small rebate.

UNFORTUNATELY, none of that applies to vehicles (I checked -- hope springs eternal...).

 

[LilbroncoS]

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.

I refuse everything. Put a huge down payment so never upside down. And i will get rid of this one around 25 k miles so no need to warranty.. just vehicle tax title license and goodbye ..

 

[DaveInSA]

I got gap via my auto insurance. And only because I bought this used, so I had to deal with 'market price'...
Gap coverage from my insurance doesn't cover as much as the third party one the dealer tried selling me (25% vs 50%), but I don't need that much and this is a LOT cheaper. And I pay for it monthly instead of all up front or adding it to the loan. So no rebate when I cancel it, but I'll also have spent a lot less.

If I was going to keep the vehicle long term I'd get extended warranty coverage via Ford Protect. But I plan on hopefully moving to a Bronco long before the factory warranty expires. The dealer offered a MasterTech extended warranty for 5 years 100,000 miles for $3,200 ... The ford protect one via the dealer on the forums here was half that for same time/miles.

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