I just saw an ad on television the other night for an “extended warranty” for car repairs. You can buy one for your car, regardless of its age, and it will then cover the cost of repairs. Got that? THIRD-PARTY PAYMENT FOR CAR REPAIRS! As we have previously noted, third-party payment corrupts the market wherever it occurs. It has virtually taken over health care, higher education, and large segments of the legal profession. It is starting to make inroads in health care for animals. And now, car repairs. Well, yes, dealer warranties have been around for a long time, and are now starting to be offered for amazingly long time spans, like 10 years. But those of us whose cars are older than 10 years (an increasing proportion of the driving population) are now being offered a chance at health insurance for our clunkers.
Since it was only a tv ad, it didn’t tell us whether the warranty includes deductibles, co-pays, and lists of covered and non-covered procedures. Or how much one pays for it. Or whether the staff of the company offering the warranty are the people who were too rude and unsympathetic (the mind boggles!) to handle managed health care.
Other questions arise: When the cost of the premium exceeds the Blue Book value of the car, is it worth the trouble? Well, maybe. The Blue Book value doesn’t necessarily reflect the value of a particular car to its particular owner. The owner who has owned that car since its first day on the road, and nursed it from infancy, may with good reason consider it to be worth a lot more than Blue Book. So maybe the rubric should be that the warranty premium has to be less than the value of a particular car to its owner. Beyond that point, the owner is well-advised to revert to good old-fashioned drive-it-into-the-ground economics, perhaps with the assistance of practical magic. (I once wrote a book called Repair Your Car With Psychic Healing, but couldn’t sell it, partly because my illustrator copped out on me.)