With our credit currently shot and us putting as much as we can towards our credit card debt, we felt it would be best to extend the warranty so we wouldn't have any car repair expenses. But was this the best idea?
The warranty was $1,200 and the coverage was for two years with unlimited mileage. We had to put $300 down and then pay $74 for 12 months. On hindsight we might have been able to put the $300 towards are debt and put the extra $74 on our credit cards or towards our emergency fund.
According to Dave Ramsey extended warranties are insurance and insurance has four parts:
- Commission
- Overhead
- Statistical payout
- Profit
Dave suggests self-insuring your vehicle with an emergency fund, stay away from repair shops that rip people off, and don't buy extended warranties.
All vehicles have mechanical problems at one time or another. The fact that my warranties always pay for themselves and we did actually get the warranty at dealer cost makes me feel better, but we probably should have researched a little further and talked to a mechanic about what kind of problems are vehicles have on average and what the cost to fix those problems usually costs.
I guess if I am thinking we don't have the money to fix our cars so we definitely won't have the money to buy new cars, but I think by the time this warranty is over our cars will be paid for and we can then put the money we were paying on our loan towards our debt or any future repairs.
How do you feel about extended warranties?
[This post is written and copyrighted by Financial Elite (http://financialelite.blogspot.com/ ).]
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