Are extended warranties really a scam?

Factual Questions
21

Semiconductors tend to fail on what is called the bathtub curve, where there are high levels of failures at the first first, usually within the first 24 hours, then it flattens down and then goes back up. With extended warranties, you are usually buying protection during the time period with the lowest amount of failures.

This isn’t a great graph, but you can see the curve. (Ignore the horizontal lines, they just are place holders.) In actuality, the right hand curve is to the very far right.

(failures)
X
X
X
XX
XXX_______________________________________X
XXXX_____________________________________X
XXXXX___________________________________X
XXXXXXX________________________________X
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
-------------------------------------------------- (time)

Manufacturers will usually do burn-in tests and test products for 24 hours. Whenever I buy a new electronic toy I’ll play around with it with heavy usage for the first day, making sure that I use all the functions since stores will usually swapt things out with no questions first.

Things with motors are different matters, of course, and anything portable can expect to receive more shocks than desk mounted equipment.

I usually don’t buy the EW, but YMMV.

22

The damned hard-sell approach to EW’s at Best Buy has completely caused me to never be a customer of theirs ever, ever again. And I’m their ideal demographic for spending. Just shut the fsck up when I say no.

I’ve since come to appreciate Circuit City, because I never, ever, ever have to talk to a salesperson. Find the item online, put in the order, stop by the service desk, and you’re done. I wish CompUSA’s in-store pickup were as fast.

CompUSA’s extended warranty was perfect for my Clie, especially in my former plant environment where I knew I’d destroy the thing (as I’d already destroy the Palm V it was to replace). When it inevitably broke, they gave me a new, better, more expensive model right then and there. However the extended warranty ended right there at the replacement time. I had to buy a new extended warranty for the replacement, which I’ve not managed to destroy yet.

I wish, oh I wish, that I’d bought AppleCare for my last PowerBook. A fallen picture frame destroyed its beautiful screen. AppleCare covers such accidental damage. At least it was still worth way more than I thought on eBay. Now I only have the tough decision to get something with the horrid name “MacBook Pro,” a Mini, or wait to see what the new MacTower Pros look like…

Don’t ever consider an extended warranty on a new car. I used to recommend them on Korean cars and Chryslers, but it looks like their quality problems have evaporated recently.

Plasma screens are always recommended as candidates for an EW.

iPods? For me it was a no-brainer not to, since I’m not all that rough with them, even in a plant environment. The Clie definitely takes the brunt of abuse. I suppose if the Shuffle were $300 I’d consider it, but for $150 it’s a safe risk.

I’m starting to think that Maxtor hard drives are good candidates, but to be honest, Maxtor’s been good to me, even outside of their warranty period so it may not be necessary.

Oh, I know – I bought an extended warranty for the house I was selling as an incentive to get the wicked-old-bag-buyer to buy. It was dirt cheap, and I escaped having to pay two mortages. I’d ask her if it was worth it, but I don’t ever want to run into her again.

23

I think the problem here is that people don’t know how to handle equipment. A Laptop is a FRAGILE thing. Leaving it to bake in the car, knocking it off the table, sitting stuff on it and cracking the screen are all STUPID things to do to something that’s fragile. You wouldn’t do that to a crystal wine glass, why would you expect a laptop to fare better?

I didn’t get the warrantee with my iBook. I’ve had it for 18 months now with nary a problem. Its data is fairly regularly backed up. Right now, I could see getting a new battery and a bigger hard drive, but this sucker’s been dead nuts reliable.

There’s something to be said for buying something due to it’s reputation. We bought a Whirlpool Refrigerator that pooped out after 8 years…did a little research, and replaced a $45 part (hard-start kit). The extended warrantee they wanted to sell us wouldn’t have been in effect. Their contention was ‘what if it dies in three years!?!<gasp>’. My contention was: If it dies in three years, it’s a crappy product and I shouldn’t have bought it in the first place!

24

Just make sure you read the fine print on the agreement. I was told by the salesthing that the EW covered “everything” on my Clie. “Even if I drop it and crack the screen?” “Yes sir, even that.” Got home and read the agreement and found out that wasn’t so. Went back and cancelled the EW.

25

They tried to sell me one when I bought my £60 microwave. The EW was something like £40. :rolleyes:

26

Over the years I’ve done pretty well by eschewing extended warranties. In the long run you are better off buying from reputable manufacturers and paying for repairs as you go.

A lot of warrantors are scummy and will look for any reason to avoid paying a claim. Also, they frequently exclude some of the most common repairs.

I recently had to replace the clutch and tires of my 5 year old car. I would wager that these sorts of repairs aren’t even covered by extended warranties.

27

A lot of time and effort and money is put into “Test To Failure” TTF of products and of the individual components of said products. TTF also includes extremes of use, I personally have been paid money to think up ways that consumers can fark things up. As a result, manufacturers have a really good idea how long their product will last given normal use and most warranties have very vague wording as to what constitutes normal use. Extended Warranties are adjusted for this.

Extended Warranties are a cash cow for the sellar. :smiley:

28

I second that. I bought an EW for my car, and spent a lot on repairs, none of which miraculously was actually covered by the warranty. For example, I had to replace two oxygen sensors (at $400 each), and sensors were explicitly excluded in the fine print.

You would expect only wear-and-tear type items to be excluded. A bit of research on the internet made it clear that oxygen sensor failure is a common problem for this particular model. They know their cars better than I do, and they knew just which likely-to-fail parts to exclude in the fine print.

29

A reason, albeit a lame one, for legitimately buying an EW includes your dependence on an item and your likely inability to afford repairing it.
Reasoning only applies to people without real savings, but if you really CAN’T afford to fix or replace an item and CAN’T afford to be without it, sometimes an otherwise stupid warranty makes sense.

30

A couple of people have recommended the EW for plasma & HD TVs. When I bought a plasma 2 years ago, it came with a 1 year manufacturer warranty, and Circuit City offered an EW for 2 years beyond that. The problem was that the EW cost about 20% of the purchase price of the TV! It also specifically excluded burn-in, and had a fairly high dead pixel count required for replacement. I passed. Given the price drops that have occurred since then, I could replace my plasma with a better model for about 3 times the cost of the EW.

So for cutting edge tech - remember that you might be able to replace whatever you’re buying for a lot less than you paid in the near future, and factor that into your decision.

31

I disagree - were I to purchase a new laptop (with the added expense and complexity over a PC), I’d want to use it to it’s fullest potential. This would involve carrying it and using it in a wide variety of places to which it would be exposed to quite a bit of danger. My laptops (so far) have been stuff I’ve scrounged and fixed from broken office equipment, so they’re rarely used anywhere else than the couch or the patio, as it would be difficult for me to get a replacement.
On a new piece of equipment, I’d consider an EW the cost of peace of mind if I decide I want to take a hi-tech jaunt to the coffee shop.

(Of course, I did turn down the $5 EW on that $10 rice cooker)

32

And that’s precisely what insurance preys on: What price peace of mind?

I’ve purchase EW’s three times. On an Xbox controller, a TV, and a Video Camera. Didn’t use them a once.

33

I got the same EW with my Ipod from future shop. This one makes sense to me, as you know the battery will die and apple will charge you an arm and a leg for a “replacement battery” Just be aware future shop will replace the battery only once. So mark your calender in 2008 the day before your warranty gos, and hightail it to a future shop for a brand new battery. The only stipulation is that it must charge to less than 50%. Tada! You beat the system.

34

In the UK, and EU nations, extended warranties are just tosh, total and utter tosh.

The reason is that you are paying the store for a warranty, when the most crucial period, the first year, is covered by the manufacturers warranty, plus the numbers of exclusions, exceptions and conditions are such that its not at all unusual to find that you are either, not covered, or you have to claim on your household loss insurance first.

The biggest reason though, is that it is horrendously poor value for money, you can go to a Lloyd insurance agent and get things like plasma screens insured for a fraction of the extended warranty, and get better cover.

Never ever buy extended warranty from a retail outlet, get a quote from an insurance company, try it and you’ll be shocked at the profiteering bastards in the retail outlets.

Whenever commission is used to make up a significant portion of income of salepersons, such as happens in certain stores, you can be sure that its not your personal interests that drive the sales pitch.

One other bonus by going down the insurance company route, is that you can get some idea of the reliability of the manufacturer by comparing the premiums on similar items from differant manufacturers.
By doing this, you can reduce your risk in the first place, or the cost of repair, or standard of service, such as being held in a long call queue to report your problem.

35

Some of the problems with extended warranties are surely attributable to the warranty provider. Apple’s EW’s are supurb. Auto manufacturer’s warranties are supurb. The only real downside to most EW’s offered by the manufacturer per se is the fact that you may not need to actually use the thing, so you’re out the sale price. If you want an iPod with an EW, for the love of God don’t buy it at Fry’s; get it from Apple direct. If you’re going to buy a used Chevy Cobalt, make sure you get a real GM extended warranty, not some “warranty company” warranty.

36

As a nitpick, it seems that oxygen sensors are expected to fail at routine intervals.
“In general, the oxygen sensor in an older car will last approximately 30,000 miles (about 48,280 km), while the oxygen sensor in a newer car can be expected to last 60,000 miles (96,561 km) or more.” [1]

Since there are tires which will last more than 60,000 miles, it does appear the oxygen sensors are wear and tear items, like tires.
Anything with a forecasted lifespan shorter than the car may be considered wear and tear.
The carmakers expect the bulk of your car to make it to 120K or 150K, so if a part will probably fail before then, it’s a wear and tear item.
Remember that warranties are meant to indemnify you against things on the car breaking that OUGHT NOT have broken. They protect you from manufacturing defects or design flaws.
Another hazard with auto warranties is that if you lose one oil change receipt or use an inferior or non-spec lubricant, your engine warranty may be voided.

[1] What is an Oxygen Sensor?

37

You should also check with your credit card to see if it offers buyer protection - Amex Gold has a pretty good deal, as far as I recall.

Sadly, it does indeed seem that nowadays EWs are pretty much part of the cost for flakey electronic items.

38

I see. That does reinforce my decision never to get an EW on a car again. It seems like way more than you would think falls under wear and tear. (I’ve owned high mileage cars before and was blissfully unaware of the existence of oxygen sensors. Never had one fail before. )

You buy the warranty expecting it to protect you from big repair costs and it really doesn’t. When you exclude wear and tear items (damn near everything, it would seem) and stuff that broke due to manufacturing defect that isn’t already covered by some kind of recall, what remains isn’t much. Certainly not enough to justify the cost of the warranty.

39

I don’t know about Amex, but VISA’s buyer protection is a completely worthless marketing gimmick. I’ve attempted to use it 4 times, and each time VISA comes up with a reason why the product is not covered.
For a cel phone:
“You have to get it *repaired * and then you will be reimbursed.”
Excuse me, it is impossible to get a cel phone repaired. There’s no such thing as a cel phone repair shop. Dealers just give you a new one when it’s still under manufacturer’s warrantly.
“Oh then, you can replace it with the *identical make and model * and you will be reimbursed”
I bought it 20 months ago, they don’ t make that type any more because every 3 months they come up with some new gee-whiz feature all the cool kids can’t live without.
“Sorry, you’re SOL”
For a different cel phone: “Did you get the manufacturer’s rebate? You did. Well, then you didn’t actually pay for the phone with your VISA card. The only thing you paid for was initiating your service.”
I forget why they wouldn’t cover the camcorder.
They would cover the VCR, as long as I paid $37 processing fee + $20 postage to send it to their designated repair place. Uh… I can buy a new one for less than that.

40

Since people have mentioned laptops and Apple products, one nice thing about AppleCare is that you don’t have to buy the extended warranty at purchase; you can buy it any time before the original warranty runs out.

I bought Apple’s EW on my iBook—after I’d had to send it back to be fixed twice for total malfunction (A flaky mainboard problem that plagued that generation of iBooks). And, a few months out of the original warranty, I had another problem. This time, the problem was minor, but I got a brand new iBook out of it. Also, they had some mix up that kept me without my laptop for about a month (the other two times, it was < 1 week round trip), so I was able to talk them into a free Gig of memory, too.

That remains the only item I’ve ever bought an extended warranty on. EW, like any other insurance, reduce risk but have a lower expected value. If you can afford to replace it, you’re better off without the insurance. For the same reason, I don’t carry insurance on my car or any other posessions.