This weekend I bought four new tires for my 1997 Honda Civic. The tires came with a pro-rated guarantee for 65,000 miles and ended up costing me $74 each, or just under $300 for the entire set.
As the salesman was tallying up the bill he asked me if I would like to purchase the extended warranty for my brand new tires.
“And how much is that?” I sheepishly asked.
“It’s only $9.95,” came the salesman’s immediate reply.
“Is that per tire?”
“Well, yes.”
“So it’s not really $9.95, right? What you meant to say is that it will cost me an extra $40.”
The salesman readily agreed and then quickly assured me he wasn’t trying to mislead me. I nodded my head but my raised eyebrows belied my true feelings.
Seeing that he was losing the battle, the sales guy looked me straight in the eye and insisted that the extended warranty was “a really good deal that most people take advantage of.”
I passed on the extended warranty but, if what that salesman told me is true, it troubles me that there are a lot folks out there who insist on wasting their money for dubious services.
Pro-Rated Tire Warranties
Almost all tires come with pro-rated warranties that are based on the wear and tear of the tire. However, tire manufacturer warranties only cover defects in workmanship; punctures or damages from external sources are not covered. Depending on the amount of tread remaining when you make a claim, you will only get reimbursed for some percentage of the full price of the tire. The rest, my friend, comes out of your pocket.
Of course, new tires are rarely defective and in the odd case where there really is a problem, it’s usually noticed at the time the tire is balanced, or soon after it has been purchased by the consumer.
Enter the Extended Tire Warranty
Tire extended warranty plans cover what the pro-rated warranty usually doesn’t: The replacement or repair of damaged tires and rims from road hazards like nails, pot holes, sharp debris, and other hazards found in the road. They usually do not cover alignments, however, which might be required if your car hits a road hazard hard enough.
Even so, that sounds like a pretty good idea, right?
Not really.
Why You Shouldn’t Pay for Tire Extended Warranties
Here are a few reasons why you’re better off taking your chances not paying for an extended warranty for your tires:
1. Some Tires May Come with Free Road Hazard Warranties – It’s not too common, but some manufacturers and dealers actually offer free road hazard warranties. Make sure you ask your tire salesman to double-check and see if your tires already come with one. After all, why pay for something if it’s being offered for free?
2. The Odds Favor the Dealer - Let’s use a little common sense here. If these extended warranties weren’t to the dealer’s benefit, they wouldn’t be offering them. I’ll estimate I’ve driven close to 500,000 miles in my lifetime and I’ve driven over a nail or some other debris that has punctured my tire and caused a flat on only two occasions; that is an incidence rate of once every 250,000 miles. Yes, I realize that is anecdotal evidence, but I suspect if I did a formal study the results would closely correlate with my experience. In my case, considering the new tires I bought are only expected to last 65,000 miles, it made little sense to insure them.
3. The Cost/Risk Ratio is Too High – Despite the low risk of tire damage due to road hazards, let’s say I did run over a nail that damaged my tire. The cost of replacing the tire is $74. Considering that I would have to pay $40 for the extended warranty, my ultimate savings would be all of $34. Insurance and extended warranties are supposed to protect us from high risk events and/or catastrophic costs – not low risk events where the financial impacts can be easily offset by scrounging for the loose change hiding between our sofa cushions. Okay, okay. You might have to raid the spare change jar too – but you get my drift.
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This great “deal” reminds me of getting comprehensive and collision insurance on your car. The premium for this type of insurance stays the same but if something happens to the car, you only get coverage for the current value of the car which is considerably lower after owning the car for, say, three years.
The king of personal finance, Dave Ramsey, recommends against all extended warranties.
@20s: I disagree with Ramsey in that regard. I can think of instances where extended warranties actually make a lot of sense. For example, parents who give their younger kids expensive electronic devices like XBoxes and hand-held devices like iPods may want to consider extended warranties. I’ve bought them for precisely that reason and they easily pay for themselves because my son is very hard on them. I’ve made multiple claims on several electronic devices that he has ruined or broken.
Len
I’ve always paid the warranties on the tyres. There were a couple of time when they hit a nail and I had them replaced. Because I had them on “warranty”, the cost to replace them was a fraction of a new tire cos they prorate it based on “can’t remember what”.
Then before I went for my recent vacation, my tire in my Lexus 350 went flat. When I came back I tried to change it (I did not have any warranties on this one). But I could not get the spare out!
So I called triple A. Guy came out and I thought he was going to change the tire for me. But instead, he repaired it. I saw him insert a thick rubbery stuff in the hole, “cemented” it and said it was good to go. He said that was the way an auto shop would repair it, but they would have charged me $40 for labor. He charged me only $7. He then said that if I brought it to the dealer, they might change it! Or had I had a warranty and brought it to the person who sold me the tires on warranty on my other car, he would have replaced it and “charge me only a prorated rate because I had a warranty!”..
Moral of the story is : warranty for tires are useless. Get a AAA membership and call them whenever you have a flat. They’ll send someone to fix it for $7!
This gives me something to think about. However, I want to add that when I purchased my car 4 years ago, we also purchased tire insurance. It was a nominal monthly fee. We’ve actually used it a couple times, like 1.) when the Honda dealership stuck glass in our tire. Yes, you heard me correctly (it’s a scam they have going and we no longer go there!), our tire insurance refunded us the cost of our tire, $125. 2.) I recently ran over a nail (I don’t know how this happened!) and the air was oozing out, enough for another motorized to point this out to me. I took it in to our tire shop and they fixed it for free (I don’t know if they would have done this for anyone, but our tires are less than 2 years old.
In the end, maybe I paid, and am still paying, way more for this convenience than the actual amount I’m getting out of it. However, I do have the piece of mind because I don’t have to worry if I run over another nail. It will be fixed free of charge!
.-= Little House´s last blog ..Wonderful Passive Income =-.
Not only do I turn down extended warranties I also turn down new valve stems. They put on new stems anyway and I save 3 bucks a tire.
.-= Daddy Paul´s last blog ..The best mid cap funds =-.
I just purchased a set of tires and also purchased the warranty even though my friend pointed out the same valid reasons not to. I did so “just in case.” It has finally dawned on me, I do have a roadside assistance plan with my car which would have someone come out and repair the tire, if necessary.
.-= Lillie´s last blog ..How Focus Can Change Your Life – Part 2 =-.
@Mr. CC: Great advice! I know that most any gas station will plug a flat for between $5 and $10. As for me, I use AAA too. I swear by their service – it is absolutely terrific.
@LittleHouse: It’s tough to put a price on peace of mind – so if the money you spends makes you more comfortable, then good for you! I am slightly concerned about the Honda dealer sticking glass in your tire. Although I have to say, I have the world’s best Honda dealer! They are very reputable and, when it comes to repairs and maintenance, they are usually the ones telling me that a service I’ve requested is not necessary.
@DaddyPaul: I always wondered about the tire valve stems! Thanks for teaching me something new. Looks like I wasted $12 anyway this time around…
@Lillie: Don’t be too hard on yourself. I ended up buying $12 worth of valve stems I probably didn’t need. LOL
It is hard to read and to digest but this is the reality one has to face.It is not only with the tyres , but the other things such as Laptops too. My friend had purchased one extended warranty for his Laptop (the name I would not like to mention) but his screen got damaged but it was not covered in the warranty !
That also doesn’t account for uneven wear, or failure to rotate those tires, either. Somewhere in there is a clause that allows them to get out of honoring the warranty.
If it fails, most shops have a used tire with over 1/2 the life available to replace it, at under 50% of the cost of a new tire.
Unless you are dropping some serious cash on tires, it is not worth the money.
I’ve never been a fan of extended warranties for anything. As mentioned, the odds are always in favor of the vendor… big time.
It’s almost never worth the money unless you are one of the unlucky ones whose tires (or other product) malfunction quickly. But even so, if you always refuse the extended warranties you will still come out far ahead in the long run.