Can a Ford Protect Extended Warranty Help You Beat Inflation?

[Zach@granger]

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
https://grangerfordprotect.com/

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[ArthurDOB]

As an Economics teacher, it's nice to see someone pull stats from FRED in an attempt to back their assertions. That being said, some individual inflation metrics will outpace CPI, just as some will fall behind it. CPI is an average of many metrics. Nice try.

 

[njb]

While insurance may benefit the few, usually insurance companies make money off the many who pay and never make a claim. I wonder if the reason the cost of insurance has risen so little in comparison to the cost of repair is more a factor of policies purchased vs claims. If claims remain small then premiums do not need to rise as much to maintain or increase revenue while still covering the cost of the higher priced claims that do come in.

Do you have any data on that (policies purchased vs total claims and average claims per a policy)?

 

[luckie]

As an Economics teacher, it's nice to see someone pull stats from FRED in an attempt to back their assertions. That being said, some individual inflation metrics will outpace CPI, just as some will fall behind it. CPI is an average of many metrics. Nice try.

if you happen to know, or know where I could look…

Historically over last five decades, what might be low to high range of inflation rates in the US? That graph would be interesting to see IMO.

 

[kodiakng]

As an Economics teacher, it's nice to see someone pull stats from FRED in an attempt to back their assertions. That being said, some individual inflation metrics will outpace CPI, just as some will fall behind it. CPI is an average of many metrics. Nice try.

using inflation to argue the economics of a bet on parts failing on your car is definitely a reach. ?

 

[kodiakng]

if you happen to know, or know where I could look…

Historically over last five decades, what might be low to high range of inflation rates in the US? That graph would be interesting to see IMO.

FRED (as noted here, federal reserve's official data) has tons of economic data. CPI is one common measure of inflation so here is a decent starting point:

https://fred.stlouisfed.org/tags/series?t=cpi

pick any of the series they list there for different variations/detail.

 

[kodiakng]

i definitely don't want to be a downer on @Zach@granger. granger ford's extended warranty offer is probably as low as you'll find anywhere for a ford factory warranty.

i personally just think of the "extended warranty" product as a hedge bet you can make on what might fail, and in what timeframe, on your vehicle. the inflation comparison would be more apt in just the change in extended warranty plan charges over time - which is much more in line with actual inflation.

the Mach-E is a first generation vehicle with a lot of high-priced components that we complain about failing a lot on these pages. your own comfort level in having some protection beyond 3yr/36k miles + any first day rental or other things beyond the base warranty is something you need to evaluate for your own situation.

 

[tuminatr]

I always buy these on cars, yes I have heard the arguments against. The warranty is so cheap though $2500 goes 9 years and 125K miles

 

[Monke]

I agree with @kodiakng . ESP is more like a bet. I bought an 8y/100k plan from Granger Ford. It was smooth transaction. It was less than $1,400 and just over $1k after points. Will I get my money worth? I cannot tell.

My entertainment screen had bad pixels and it was covered under new car warranty. A used screen is around $1k. The dealership estimated the work to be around $4k. I did not expect a screen replacement on a car with less than 5k miles and less than a year old. If I need a new screen again after 3y, I would save $2,600 minus $100 deductible.

My BC is not working again. The problem could come from OTA updates or hardwares. A back up camera is around $2k plus installation. Many cameras are used for BC. I feel more comfortable with ESP.

 

[Strykerwsu]

I had about $6k covered on our old Flex vs $1,500 warranty cost so it paid for my Mach e and Bronco warranties from @Zach@granger with money left in my pocket.

The Flex was first year of new digital screens and all failed out of warranty along with turbos amd misc other items.

With Grangers deal so close to cost it is a no brainer if you keep vehicles 10 years like I do.

 

[ArthurDOB]

if you happen to know, or know where I could look…

Historically over last five decades, what might be low to high range of inflation rates in the US? That graph would be interesting to see IMO.

You could also try the Bureau of Labor Statistics at bls.gov

If you run into someone with expertise in monetary policy they could probably explain to you that high and low inflation rates over long historical periods don't really tell you a whole lot about what's going on today.

Here's a recent inflation analysis I read recently. Perhaps you might find it informative.
If It Bleeds It Leads, Inflation Edition https://www.nytimes.com/2024/05/07/...unlocked_article_code=1.uE0.rwWW.YcQTlTvidXNs

 

[luckie]

You could also try the Bureau of Labor Statistics at bls.gov

If you run into someone with expertise in monetary policy they could probably explain to you that high and low inflation rates over long historical periods don't really tell you a whole lot about what's going on today.

Here's a recent inflation analysis I read recently. Perhaps you might find it informative.
If It Bleeds It Leads, Inflation Edition https://www.nytimes.com/2024/05/07/...unlocked_article_code=1.uE0.rwWW.YcQTlTvidXNs

I was just curious what inflation rates were common prior to the recent long period of insanely low interest rates and low inflation.

 

[dabois89]

i definitely don't want to be a downer on @Zach@granger. granger ford's extended warranty offer is probably as low as you'll find anywhere for a ford factory warranty.

i personally just think of the "extended warranty" product as a hedge bet you can make on what might fail, and in what timeframe, on your vehicle. the inflation comparison would be more apt in just the change in extended warranty plan charges over time - which is much more in line with actual inflation.

the Mach-E is a first generation vehicle with a lot of high-priced components that we complain about failing a lot on these pages. your own comfort level in having some protection beyond 3yr/36k miles + any first day rental or other things beyond the base warranty is something you need to evaluate for your own situation.

that and very few mechanics being able to work on EVs especially when you live in a small rural state like i do.

 

[ArthurDOB]

I was just curious what inflation rates were common prior to the recent long period of insanely low interest rates and low inflation.

Try this link: https://data.bls.gov/pdq/SurveyOutputServlet

Plug in the date range you're interested in, check the boxes for graphs and annual averages, and click "Go." You'll have everything you need to answer your question.

 

[luckie]

Try this link: https://data.bls.gov/pdq/SurveyOutputServlet

Plug in the date range you're interested in, check the boxes for graphs and annual averages, and click "Go." You'll have everything you need to answer your question.

thanks yep did so, made nice graphs etc, also saw the days of 14% inflation and when mortgage rates finally came down to super low levels of 8% lol etc, ?

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