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Old 02-01-2013, 07:57 AM
Skarv Skarv is offline
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Location: Silicon Valley
Join Date: Oct 2010
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Mein Auto: '05 645i convert
Originally Posted by mjposner View Post
Everyones analysis like this "CPO (or any other warranty) is for the provider to make money... thats the bottom line, else they won't be offering it." is wrong. What they do is spread the risk over a large group so that overall, the costs of repair do not exceed the cost of the coverage. They also have hits and misses, as it is a guess (past performance does not guarantee future performance). At the individual level it is a much trickier analysis. Do you trade certainty (XX dollars for Y years) with risk (repairs may be less or more than XX in the same YY period). Given BMW's complicated design, high cost of parts and labor and the likelihood of at least one major item failing in YYY years, I personally opted for the extended warranty.

As an aside, I bought a 2004 Audi Allroad in 08, one owner, full service, clean carfax and only 35k miles. in 1.5 years and 17k miles it had over $17,500 in required repairs. All but $1k covered by my extended warranty.

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You are actually agreeing with the "don't buy" crowd so I don't see why you call it "Wrong". Essentially, your point is that on average, they pay out less than they take in. Which means that they are betting that on average, they will charge each of us more than they pay out for our cars. Individually, you are correct, some of us will win because we might have a lemon. But that doesn't change that it is a bad bet. Essentially, you are advocating playing roulette with the odds against you. Yes you can win, but on average you will lose. Essentially, financially, you are advocating a bad decision, but betting on a good outcome. AKA lottery tickets.

This scenario however can be a good decision too. Insurance has its place even if by definition it is a bad financial bet. That place is when you can't afford to lose. Essentially, you can't afford to be the outlier. Then it makes sense because you will lose your house, or you lose your life savings etc. This is why liability insurance is a good decision for most of us. But this is a function of how much money you have. Bill Gates shouldn't bother, but I should.

So back to CPO:

If you can't afford a big repair, but you can afford the CPO, then buy it. (good decision for financial reasons)
If you can't sleep at night, or enjoy your car in the day, because you might get a big repair, buy it. (good decision for non financial reasons)
If you have reason to believe your car is 'at risk' then buy the CPO.
If you can afford repairs, and can sleep knowing you can lose this bet that has odds in your favor, the let the CPO pass. (good decision for financial reasons)

Final footnote: All of the above is irrelevant if you bought an Audi!! In the experience of my friends, (non scientific survey) you own an Audi, you buy the CPO. One of these was a tow truck driver who said "another Audi today" as he picked up my friend's dead one. I have never seen more major trouble in a single marque. Seems the odds are stacked in your favor with Audis

Last edited by Skarv; 02-01-2013 at 08:08 AM.
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