What is the value of finance insurance policies?

[m3forme2016]

Picked up the new ride today, and was surprised when the finance manager (I think that is their title) tried to sell me 7 different policies for $10K extra. He appeared shocked when I declined all of them.

Are any of these policies valuable? Does anyone buy them?

FWIW, I googled and did not find much relevant info. What exactly are these policies called?

[jjrandorin]

we dont know what they offered you... every dealer can have different BMW or third party policies.

In general, from BMW, there are:

BMW Extended warranties
BMW Extended maintenance (ultimate care or ultimate care+)
BMW Tire and wheel warranty
BMW Lease damage waiver coverage

There is some plan that also includes lojack. I decline them all, but there are many people (who dont usually visit forums) who buy them.

[firedown31]

For the most part everything trying to be sold to you isn't worth it. After all why would the dealer sell it if they weren't making money off it/you. But everyone's situation is different. For example, if you live in a pot hole area and bust 2 tires/rims a year then it might make sense to get the tire/rim protection.

[Alpine300zhp]

Originally Posted by firedown31

For the most part everything trying to be sold to you isn't worth it. After all why would the dealer sell it if they weren't making money off it/you. But everyone's situation is different. For example, if you live in a pot hole area and bust 2 tires/rims a year then it might make sense to get the tire/rim protection.

This.

[m3forme2016]

Originally Posted by firedown31

For the most part everything trying to be sold to you isn't worth it. After all why would the dealer sell it if they weren't making money off it/you. But everyone's situation is different. For example, if you live in a pot hole area and bust 2 tires/rims a year then it might make sense to get the tire/rim protection.

This argument doesn't make any sense. Just because they make money off it doesn't mean it's not worth it. This is how all insurance works.

Having said that, the whole process seems designed to pressure the buyer to decide without giving them any real information or time to decide. It seems very dishonest, but that's how the car business works in the U.S.

BTW, he almost sold me on the Gap Insurance. It was only $15/month. But I got it through my insurance and it is only $4/month.

[dmk08]

Originally Posted by m3forme2016

This argument doesn't make any sense. Just because they make money off it doesn't mean it's not worth it. This is how all insurance works.

Having said that, the whole process seems designed to pressure the buyer to decide without giving them any real information or time to decide. It seems very dishonest, but that's how the car business works in the U.S.

BTW, he almost sold me on the Gap Insurance. It was only $15/month. But I got it through my insurance and it is only $4/month.

What insurance company do you have? I fell for this with Nationwide as they told me "new car replacement" was the same as GAP. Its not make sure you read the fine print. State Farm pointed this out to me when I swapped.

[jjrandorin]

Originally Posted by m3forme2016

This argument doesn't make any sense. Just because they make money off it doesn't mean it's not worth it. This is how all insurance works.

Having said that, the whole process seems designed to pressure the buyer to decide without giving them any real information or time to decide. It seems very dishonest, but that's how the car business works in the U.S.

BTW, he almost sold me on the Gap Insurance. It was only $15/month. But I got it through my insurance and it is only $4/month.

You are right, this is how all insurance works. Its ALL designed to make money, the more money the better. Insurance companies look at trends and then offer their products at a price that ensures that, vs the amount of claims they expect, they will make plenty of money.

They sometimes guess wrong, but if they do that too often, they go out of business.

Back to these products. Firedown has it nailed like 100% Everyones circumstances are different. Some would like the security of knowing they paid $1300 for wheel and tire insurance (for example) than have to worry about "having enough money" to afford repeated flats and or bent rims.

For that particular insurance ( again for example) the dealer will say that each tire costs around 350 to replace which is true... at the dealer. People see $$$ of multiple flat tires because of what they read or hear about run flats, so they buy it (I did on my first BMW because of the above anyway).

For some reason, I forgot the fact that I had zero flat tires in like 10-15 years of driving, and got convinced back then that I would have enough flats to balance out the cost, which of course did not happen.

It might for some, but thats rare... even at dealer prices it would take 4 tires to make money on it, or a couple of tires with bent rims.

Still, some will like the security of knowing that its covered, even if it costs them more money up front for that security.

Thats how insurance works, you cover yourself against the probability of financial disaster.. or you have enough money to "self insure".

Not taking any of those packages basically means you (a person) is self insuring, which will usually save a person money on the lease / purchase. Not always, but the percentages are there that you will not "earn it back".

Like I said, even with all of that, for some the insurance makes them feel more safe and comfortable with the purchase, and that feeling is hard to quantify financially, so for those people it is the right choice.

[m3forme2016]

Originally Posted by dmk08

What insurance company do you have? I fell for this with Nationwide as they told me "new car replacement" was the same as GAP. Its not make sure you read the fine print. State Farm pointed this out to me when I swapped.

I have Progressive, which has been awesome.

I see the distinction you are making. Gap Insurance is not going to be enough for the new car. The finance manager called it Gap Insurance as well, but maybe he was referring to "New Car Replacement". Too bad I didn't understand this as I might have actually bought it.

Apparently Gap Insurance does not cover the cost of a new car (http://lifelanes.progressive.com/gap-insurance/). How much does State Farm "New Car Replacement" cost?

[dmk08]

Originally Posted by m3forme2016

I have Progressive, which has been awesome.

I see the distinction you are making. Gap Insurance is not going to be enough for the new car. The finance manager called it Gap Insurance as well, but maybe he was referring to "New Car Replacement". Too bad I didn't understand this as I might have actually bought it.

Apparently Gap Insurance does not cover the cost of a new car (http://lifelanes.progressive.com/gap-insurance/). How much does State Farm "New Car Replacement" cost?

Gap insurance covers the difference between what you owe on the car and what insurance would pay in a total loss. So car is worth 65k but you still owe 75k for example they would pay the 10k difference.

So for me since I got .9% apr for 60 and put nothing down (invested instead) I'm a little upside down for the first couple years. For this reason I purchased the gap.

[bb1857]

Typical rule of thumb is if you finance for longer than 48 months and put zero money down, meaning you finance car, tax, tags, title, etc then you should buy GAP insurance. If you finance for 60 months or longer and put 15-20% down then you can avoid GAP. If you have negative equity you are financing at almost any term then that makes GAP even more important.

[jboud18]

Signed for my car last month. I bought Gap, Wheel and tire package and extended maintenance for the full 36000 miles. I bought the gap because I extended my loan with "fine" credit to keep the payment low and extra money. Wheel and tire because when I sold my GLi after 2 years, I had 4 bent rims. Also 3 tires replaced. Bubbles in 2 and a pothole killed a tire after 6 months. Thanks Upstate NY. The maintenance wasn't needed. But after 2 years I can decide if I want to keep the car and extend the warranty through BMW, mod the car or sell it. That was my mindset when signing my name on the dotted line.

[fecurtis]

I negotiated the wheel and tire insurance 3 years ago for about $800.

Since DC has completely garbage roads and since RFT's suck, in the three years I've had EIGHT tires replaced.

So yeah that wheel and tire insurance was definitely worth it for me.

[afadeev]

Originally Posted by bb1857

Typical rule of thumb is if you finance for longer than 48 months and put zero money down, meaning you finance car, tax, tags, title, etc then you should buy GAP insurance. If you finance for 60 months or longer and put 15-20% down then you can avoid GAP. If you have negative equity you are financing at almost any term then that makes GAP even more important.

I don't see the logic in the above rule-of-thumb: why would anyone ever buy GAP insurance?
If you can afford monthly payments in the neighborhood of $1K/month, why can't you self insure for the few $K in the (potential gap) between depreciated value of the car and the loan payoff amount? The only time this could ever come into play is if your car is totaled - a relatively rare outcome.

Car dealers and insurance peddlers all like to scare out about "negative equity", but in reality, we are talking about a few $K one way or the other.

Hardly a weather maker for someone in the market for a $70-90K car!

a

[jjrandorin]

Originally Posted by afadeev

I don't see the logic in the above rule-of-thumb: why would anyone ever buy GAP insurance?
If you can afford monthly payments in the neighborhood of $1K/month, why can't you self insure for the few $K in the (potential gap) between depreciated value of the car and the loan payoff amount? The only time this could ever come into play is if your car is totaled - a relatively rare outcome.

Car dealers and insurance peddlers all like to scare out about "negative equity", but in reality, we are talking about a few $K one way or the other.

Hardly a weather maker for someone in the market for a $70-90K car!

a

Because gap insurance is relatively cheap, and if you purchase a 50K+ car with no money down, and somehow get it totalled (rare but does happen, and they call them "accidents" for a reason) the potential for loss to the customer is pretty high.

I guess it also depends on what you feel a "few k" is. If you had a new M3 and drove it for 6 months, and then made a driving mistake and totalled the car, when insurance went to pay it off, without gap insurance you are looking at 6-8k difference out of your pocket AFTER insurance pays.

Again, this is if someone puts no cap cost reduction into the deal. Who wants to come up with 6-8k for a car thats gone, on top of whatever went on with the accident?

Even if one can afford it, its relatively cheap insurance (unlike "tire and wheel or lease turn in protection").

[m3forme2016]

It makes sense to me because:
1. Low price. $4/month IIRC.
2. There are a lot of crazy drivers and they don't stop at red lights. They don't look before cutting in my lane or turing right from the left lane.
3. My insurance company actually offers a good deal IMHO. They pay 25% over the "value" of the car. So for the first year that would be enough to get a brand new replacement.
4. Peace of mind. Not logical, but we are not logical beings, contrary to popular opinion.
5. I don't think it would be a "a few $K". 10% or 15% depreciation, plus 10% tax + license (yes, that's how much it is in Cali). That is $16K - $20K, with a price of $73K + tax and license.

Originally Posted by afadeev

I don't see the logic in the above rule-of-thumb: why would anyone ever buy GAP insurance?
If you can afford monthly payments in the neighborhood of $1K/month, why can't you self insure for the few $K in the (potential gap) between depreciated value of the car and the loan payoff amount? The only time this could ever come into play is if your car is totaled - a relatively rare outcome.

Car dealers and insurance peddlers all like to scare out about "negative equity", but in reality, we are talking about a few $K one way or the other.

Hardly a weather maker for someone in the market for a $70-90K car!

a