Can a Ford Protect Extended Warranty Help You Beat Inflation?

[Granger Ford]

It is not breaking news that prices are up on everything. Inflation has run high, and the federal reserve doesn’t think the battle is over yet to get inflation back down to 2%. One of the areas that has seen some of the biggest price increases is the automotive repair industry. The Federal Reserve Bank goes in detail to explain the reasons why, but it boils down to a tight workforce that is in high demand as well as a parts shortage.


I was curious to see how much that has affected our service department, so I pulled all our repair orders that were paid by an extended warranty company for 2 time periods (Jan-Apr 2020 and Jan-Apr 2024) to see how it has changed at our shop. Through the first 4 months of 2020 our average repair order covered by an extended warranty was $776, and in 2024? An eye-popping $1841! That is a 237% increase in 4 years. Admittedly we have a small sample size being only one dealership. But for the last 3 years, the federal reserve has registered a 5%, 13% and 8% rate of inflation for motor vehicle repair, well out-pacing overall CPI.

So what can be done to minimize the effects of repair inflation? One of the lesser talked about benefits of an extended warranty is that you are locking in tomorrow’s repairs at today’s repair prices. We work with both Mopar and Ford extended warranties and both of them have many actuaries that determine our cost for their plans. The feedback I’ve received from both manufacturers suggests prices will continue to rise in the future, because repair cost increases are well outpacing the reserves set up to cover them. Ford has scheduled a price increase in August of this year and Mopar just increased its prices in February and is considering doing it again.


I again was interested in seeing what increases we’ve seen over the last 2 years of selling service contracts and our average service contract price has increased 14%, much less than the 23% the CPI repair costs have increased at the same time. None of us can predict the future, but in the past inflation has proven to be sticky and takes longer than anticipated to get fully under control.


Another tool we’ve added to our websites is the ability to pay monthly. We realize increased prices have eaten away at monthly budgets and spending over $2000 on extended warranty coverage can be hard to budget for. So, we added a monthly payment option that allows our customers to pay for their warranty over an 18-month term. Our average monthly payment is taken automatically and comes out to less than $100/month.


You can find our coverage options for both Mopar and Ford on our websites.

www.buymoparwarranty.com
www.grangerfordextendedwarranty.com

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[kappy44]

I have had over 60 vehicles in my life. Each of them had extended warranties that were from the vehicle's manufacturer. Years ago you could get a refund from the dealer for unused time and mileage with proof of sale or trade. Now it is about a six week period to get said refund from the manufacturer. I for the most part keep my vehicles for 2-3 years, but have had a few I kept much longer. With interest rates being what they are and the cost for these vehicles increasing at the same rate the extended warranty is a no-brainer. Just have the cost of the warranty written into your deal if you finance and realize there is a dealer markup on the sale of the warranty so negotiate this "option" as well.

 

[rocks]

I usually buy an online discounted auto manufacturer's warranty. Though, I don't keep a vehicle long, it's a just in case and I get a prorated refund. I think you can beat inflation of repair and part costs over the period of the warranty. Prices always go up.

 

[sajohnson]

Good point, Zach. I don't think I've heard anyone else mention inflation in car repair costs as a reason to consider an extended warranty.

As you said, "We work with both Mopar and Ford extended warranties and both of them have many actuaries that determine our cost for their plans. The feedback I’ve received from both manufacturers suggests prices will continue to rise in the future, because repair cost increases are well outpacing the reserves set up to cover them."

Of course that's always been the case, perhaps to a lesser extent.

All insurance is gambling, and the house always wins. The actuaries have all of the data. When they set the price of an extended warranty they take inflation into account, along with average failure rates over various mileage periods, cost of repair, etc.

There will always be a few "winners' -- and they will generally tell anyone who will listen how they got repairs that cost 3-4x what the warranty cost. The people we generally do not hear from are the much greater number of 'losers.' That can make extended warranties seem like a good deal.

The only way to gain an advantage is if an owner knows their use will be outside the norm (but not 'abuse.') For example extended high-temp operation in the mountains at full GCWR.

Needless to say, I don't care how other people spend their money, but it is accurate to say that with all insurance, the underwriter must take in more than they pay out -- or they will go bankrupt. In fact, I was just reading a KCCI article today about insurance companies leaving Iowa due to all of the severe weather related claims -- hail damage cost them more than tornadoes. I am very sorry to hear that. The same has been happening in CA and FL.

One reason people cite for buying an extended warranty is piece of mind. Can't argue with that. If they want to limit their repair expenses to the cost of the warranty + any deductibles + the opportunity cost (lost interest earnings) and not worry about a potentially larger repair bill, that's understandable.

 

[NMhunter]

Most folks live paycheck to paycheck and aren't prepared for a bill over $1000. For them, budgeting it into their car payment prevents having to put repairs on a credit card later. I tend to self insure, up to a point. I try to use insurance for catastrophic occurances. For many, a $5,000 bill for a new transmission would be just that.

 

[rorlow]

I recently retired I bought out my lease and purchased the Ford extended warranty. Paid off both in full. At this point in my life I want as few monthly or unexpected bills as possible.

 

[hedhie57]

do extended warrenties earn reward points?

 

[Granger Ford]

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At Granger Warranty, we believe in transparency and value. That’s why we offer factory-backed protection plans for just $25 over dealer cost — giving you the same great coverage without the high dealership markup.


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Protect your vehicle and your budget with a plan that works for you.
Visit www.grangerfordprotect.com to learn more and get your quote today.

 

[sajohnson]

$25 Over Dealer Cost – Only at Granger Warranty


At Granger Warranty, we believe in transparency and value. That’s why we offer factory-backed protection plans for just $25 over dealer cost — giving you the same great coverage without the high dealership markup.


• Genuine coverage for any make or model
• Nationwide protection and service
• No hidden fees or gimmicks
• Easy online quotes and plan options


Protect your vehicle and your budget with a plan that works for you.
Visit www.grangerfordprotect.com to learn more and get your quote today.

I continue to have a good impression of Granger -- plus, both my wife and I have a lot of family in Iowa, which helps.

If a person wants an extended warranty for piece of mind, Granger is a very good option.

That said, we continue to hear people justify buying a warranty by citing the cost of repairs; the less than stellar reliability; inflation, etc. Some claim it's a 'no brainer' -- as if buyers are all but guaranteed to make money on the deal.

As I said in post #4, the underwriter is fully aware of all of those factors. Like any insurance company, they are in business to make (a lot of) money. The hard cold reality is that most buyers will be 'losers' -- they will pay more for the warranty (and potentially deductibles and/or co-pays) than they get back. There are of course also a few 'winners' as well -- those that get a new engine or transmission under warranty. But the idea that an extended warranty is somehow a great deal -- that practically all buyers will get more in covered repairs than they paid -- is simply false.

For those who are comfortable with it, the best bet (on average) is to be self-insured.

 

[Dude]

I continue to have a good impression of Granger -- plus, both my wife and I have a lot of family in Iowa, which helps.

If a person wants an extended warranty for piece of mind, Granger is a very good option.

That said, we continue to hear people justify buying a warranty by citing the cost of repairs; the less than stellar reliability; inflation, etc. Some claim it's a 'no brainer' -- as if buyers are all but guaranteed to make money on the deal.

As I said in post #4, the underwriter is fully aware of all of those factors. Like any insurance company, they are in business to make (a lot of) money. The hard cold reality is that most buyers will be 'losers' -- they will pay more for the warranty (and potentially deductibles and/or co-pays) than they get back. There are of course also a few 'winners' as well -- those that get a new engine or transmission under warranty. But the idea that an extended warranty is somehow a great deal -- that practically all buyers will get more in covered repairs than they paid -- is simply false.

For those who are comfortable with it, the best bet (on average) is to be self-insured.

For another interesting opinion about the extended warranty, have a look at the following post

https://www.broncosportforum.com/forum/threads/drivers-side-headlight-acting-wonky.18365/post-286212

“As someone who works in the auto business: If long term ownership is the plan, a warranty is an excellent idea. There's a bunch of stuff that gets peddled to you when you are signing the paperwork that you can safely decline, but these newer vehicles are way too complex and expensive to repair to not have a warranty. 99% of the time, those warranties will pay themselves off.”

 

[sajohnson]

For another interesting opinion about the extended warranty, have a look at the following post

https://www.broncosportforum.com/forum/threads/drivers-side-headlight-acting-wonky.18365/post-286212

“As someone who works in the auto business: If long term ownership is the plan, a warranty is an excellent idea. There's a bunch of stuff that gets peddled to you when you are signing the paperwork that you can safely decline, but these newer vehicles are way too complex and expensive to repair to not have a warranty. 99% of the time, those warranties will pay themselves off.”

I'm sorry but that is some Grade A bs from a person 'in the auto business.'.

If, as he says, "99% of the time, those warranties will pay themselves off", the underwriter would go bankrupt!

Buying an extended warranty is "betting against the house" and the house always wins.

We frequently hear his claim that, "...these newer vehicles are way too complex and expensive to repair to not have a warranty." Yes, they are complex, and repairs are expensive, but the underwriter does not live in a cave. They are well aware of inflation, typical problem areas, failure rates, and the average cost of repairs for each vehicle.

When we picked up our BS, the salesman and the finance guy were both hounding me about the extended warranty -- saying that (essentially) the BS is a POS that will require a huge number of expensive repairs. They pointed out that the rear camera was known to fail and it costs $800 to replace. I replied that as a technician I'd either replace it myself, or we'd do without -- since none of our previous vehicles have cameras. They gave up at that point.

Can an extended warranty pay off? Of course, but most of the time they do not. It must be that way for the underwriter to stay in business.

That does not mean that no one should ever buy a warranty. If it gives the buyer piece of mind then it's probably worth it. Another reason is if -- knowing that it will almost certainly not pay off -- the buyer still feels that limiting their total *potential* repair expense is important.

 

[Dude]

I'm sorry but that is some Grade A bs from a person 'in the auto business.'.

If, as he says, "99% of the time, those warranties will pay themselves off", the underwriter would go bankrupt!

I was only providing a link to a differing opinion

 

[Garth]

My dad sold fords for 30 years, just a salesman but very successful in a good area where he grew up. When I was telling my mum that I had bought the BS she asked “you didnt buy the extended warranty? Your dad always said dont buy the extended warranty”.
The dealerships line they used on me was the screen on the dash would cost $8,000 to replace if it failed. So I compromised and didnt get the 8 years, settled on 5 and with some other adjustments knocked $5,000 off the final price.

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