Are extended warranties really a scam?

[Lightnin]

Ah, I should also add:

During one of the electronics fiascos I mentioned above, I was told by the manager that I could always buy the EW after the fact- even after the device needed repair!

In other words, never buy the EW on a new purchase. Only do so when the device breaks, and only if the EW is cheaper than the repair cost (which it is, generally- at least in stores like Circuit City and Best Buy). There’s a minor delay after the purchase of the EW before it can be used- but it’s not long.

Ethical? Probably not. Smart? Definitely. And, like I said, I was told to do this by the manager of the store.

[Nanoda]

@Unintentionally Blank

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.

I wouldn’t have gotten an EW on those items myself, but then EW or not, I’m still going to drive the Warthog, watch ‘Girls gone Wildester’ and film that wedding. (Not all at the same time, naturally).

An EW on my laptop on the other hand might be the difference between tossing in the car when I go out or leaving it at home. I’ll get an EW if not having it is going to actively curtail my use of the product.

[Voyager]

@Seven

This is really what it comes down to. Fry’s Electronics EW is worded in such a way they really wouldn’t have to replace anything if they didn’t want to. They have an entry that says the item MUST be returned in the original box. Who’s going to store the box and packing from a 42 inch plazma tv for 3-5 years?

If you plan on getting an EW, READ THE FINE PRINT. Fry’s might tell you it covers damage to the unit. It doesn’t. Also, Fry’s might give you a sheet of paper which tells you what the EW covers but the “contract” you sign at checkout has different wording. You don’t get this contract until you pay - it is printed on your receipt. Before you sign make sure the serial numbers on your paperwork match the ones on the product. I know of people who’ve been denied EW coverage because of a checkout persons typo.

I bought my laptop at Fry’s, with an EW (since I don’t trust the things.) It turns out my model has a problem in which the heatsink gets dusty and the thing overheats. So, the EW came in handy - especially because it comes with a loaner, which was nice since it was in the shop for a month.

They didn’t need or want the box - which I still had. They did try to sell me a backup of my disk. They were very unhappy that I had just done one, since the machine wasn’t broken enough to prevent it. A woman there at the same time got one - it cost over $100. :eek:

Happily, the repair people were not incompetent enough to trash the disk while cleaning the heatsink.

My philosophy is to only get an EW for fragile stuff for which a replacement would be painful and expensive. No to DVDs and desktops, yes to large screen TVs and laptops. I think I’ve won for over half the EWs I’ve bought.

[Seven]

Voyager: Sounds like you came out ahead. But that is part of the problem with EW’s - everyone has a different story to tell.

I’d be more willing to back EW’s if 80% of the people had good things to say about them.

I can tell you stories of Dell warranties that will make your head spin. Sure, at the end of the day the machines were repaired (so the EW wasn’t a total loss) but it would have cost the company I worked for far less money to have me buy the raw parts and repair the dead items myself.

[Rick]

@Mr. Slant

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]

Umm no. When O2 sensors first came out they did have a 30K interval. Then it went to 60K, but back in the mid eighties, heater circuits were added, and replacement intervals were dropped from the maintenance schedules for most if not all makes of cars.

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.

You are confusing the carmaker’s warranty and an extended warranty. EWs do not specify manufacturing defects or design flaws. If it is covered and broke they cover it. (Subject to the exclusions of course)

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.

Again not necessarily true. If your maintenance book is stamped, or if your dealer / mechanic has a copy, you should be good to go. The only times I have seen warranties denied is because the work had not been done, not because of a paperwork snafu.

[tim314]

@Shagnasty

Extended warranties are offered because the money that they take in is expected to be much more than the money that they pay out.

You are looking at it as a series of isolated cases which is really the wrong way to look at it. Every extended warranty is set up so that the average person comes out a loser. If someone gets a payoff on one they tend to think of that as a smart “investment”.

The right way to think about it is to imagine what would happen if you bought extended warranties on every large purchase. You can be certain that you would lose money over the course of your life. It would be much more cost-effective to accept that some things are going to break and simply paying for them when it happens is a smarter option.

But couldn’t you say the same for any kind of insurance? If an insurance company is profitable, they must be taking in more money than they’re paying out. But that doesn’t mean I shouldn’t buy any insurance.

[lskinner]

@tim314

But couldn’t you say the same for any kind of insurance? If an insurance company is profitable, they must be taking in more money than they’re paying out. But that doesn’t mean I shouldn’t buy any insurance.

You need to ask yourself 3 questions:

First, can you comfortably absorb a loss yourself? If so, there’s no need to buy insurance. So for most people, there’s no point in insuring a $100 piece of consumer electronics. On the other hand, it’s usually worth it to insure a $500,000 home.

Second, is the insurance good value? If 90% of your insurance premium is pure profit for the insurance company, it’s a sign that you are overpaying.

Last, is the insurance company likely to try to screw you when you do make a claim? If the insurance company obstructs valid claims, it’s much less worthwhile to purchase a policy.

With most extended warranties, the above questions militate against purchasing the insurance. Most people are able to simply pay for repairs as they come up; extended warranties are fantastically profitable for insurance companies; and obstruction of claims is a huge problem with many extended warranties.

On the other hand, if you buy homeowner’s insurance from a reputable insurance company, it makes a lot more sense.