Originally Posted by WithoutAdoubt

Well I can tell that you as well as several other people don't know what you are talking about by this statement. Where they make huge profits? You guys are kidding me right? Have you ever had a car repair? If they sell a service contract for 1,500, 2,000, 3,000 dollars do the math, of course there is profit in there, but do you think the cost of that policy is $50 dollars or something? At the Honda dealership I work at labor is $105 an hour, then throw in parts and diagnostics time, where is all this profit you are speaking of.

If you actually were well read on the subject, you'd learn that legitimate service contracts typically return .91 cents on the dollar. Yes, this means you lose 9 cents per dollar spent on average. Some people don't use their service contract, some people use it a few times and break even or close to it, and some people use it a ton and would have been hosed if they hadn't had it.

It's called transfer of risk. You have to ask yourself is the monthly payment increase or cash price worth the not having to worry about it or coming up with hundreds or thousands of dollars at any given time. I make excellent money. I still do not want to cough up an unexpected $1,000 bucks, which by the way is quickly becoming the average repair for a Honda on any given shop repair visit.

Guess what the National Highway Loss Data Institute discovered in 2005 when they stopped studying costs of vehicle accidents and studied the average car repair for all vehicles. Over $3,900 bucks per incident, and this study was based off what the service contract companies paid out mind you, not the stupid customers who paid cash for their giant repairs because there was no way to track those numbers. This study is now nearly 7 years old. Do you think the cost of repairs has gone up perhaps?

You and anyone are entitled to your opinion on service contracts, they are an insurance policy. But making statements like what you just said makes me think you are either poorly read on the subject or my grandfathers age.

You want to know where the giant profits are? Try the repair shop. Don't believe me? Go look at a fire escape plan at your local dealership and you tell me where 85% of the floor plan is dedicated to. You guessed it, the repair shop. Do you think if they make so much profit off the cars and warranties that they would give all that valuable space to the shop guys? Space is a commodity my friend. If you are right, then why don't they have one repair bay and then a giant sales floor and huge sprawling finance offices, and 50 finance managers selling those super profitable warranties. You are living in la la land and basing your blanket statements off facts that were true over 20 years ago. Time to catch up with the times dude.

Oh and one more thing, good luck with your major problem recall theory. Yes, if nationwide everyone has a problem it's a recall. If a lot of people have an issue they can issue a service bulletin. What happens when problems arise which don't meet the government recall or bulletin standards, you end up paying. And it takes a huge amount of problems before a manufacturer is forced to pay for repairs. And what happens when you find out you are one of the lucky folks whose car just broke, or your CD player or NAVI stopped working, or your window motor wore out, or your doors don't unlock. Pull out that credit card buddy boy.

Nothing get's me more fired up than the uneducated. Good for all you people who did your research and bought a service contract. One last thing, you can negotiate to a certain extent if the dealer wants to that is. Buying a service contract is smart, paying too much for it is as stupid as the guy who doesn't buy one and thinks they make all the money on them.

The reason they push warranties on people is because studies show that a customer who purchases a car AND a warranty is extremely more likely to return to that dealer for repairs and maintenance even if the warranty allows them to take it anywhere they want. Why? Well because they don't have to pay for repairs because of the warranty and most people develop a relationship with their service advisors and dealership personnel if the experience was a pleasant one. They make the most money off service, repairs and maintenance, and they would rather have you not pay for it and sign your name and give thumbs up reviews and smile while you whistle dixie out the front door then not buy a warranty and come in and bitch and complain and yell at the receptionist because she asked for your card to run it for $2600 bucks because you were such a smarty and decided not to buy the warranty.

It's not rocket science that they push those towards people. A customer with 8 years of free repairs is a happy, loyal and repeat customer typically. The idiot who doesn't buy one stops coming in after their free 3/36 manufacturer defect warranty expires. And that's a good thing too because they are they ones who bitch and complain about EVERYTHING. Good riddens.