I generally never buy extended warranties, but after my service and repair experience with my daughter’s notebook PC I would buy an extended warranty given the rough handling she inflicts on delicate electronics. I also bought an extended warranty on my Samsung 760 PDA phone given what it is likely to go through.
I refused to buy an extended warranty for a new set of tires at SAM’s Club the other day. It was $ 10 per tire. I refuse to buy warranties for desktop PCs and accessories.
Is there anything else it would make sense to buy an extended warranty for?
In the UK a few years ago I heard an advocate for consumers rights arguing against them for things like new cars- the argument being if something major is going to go wrong it will be within a the first year or so. I still get them on sau a new computer, as I know the hiding it will receive.
However, I get it through the manufacturer, not through the store which is often a 3rd party arrangement.
That is probably true, but if you took that to its logical conclusion you would never buy any type of insurance.
I have health and car insurance and my expectation is that I will put more money into these then I will get out, but the point is not an expected profitability. It is to limit the financial catastrophe in the case of major accidents or illness. In essence, I’m purchasing some security.
The reason I buy health insurance and typically don’t buy extended warranties is that the potential financial catastrophe related to accidents or illness can wipe me out completely, whereas I don’t own anything expense enough that I couldn’t replace with cash right away. In the latter scenario the negative profitability does come into play, I may lose out on a specific item when it blows up and I do not have the warranty, but over my lifetime of buying stuff I am betting I will be better off financially by not buying the extended warranty and paying out of pocket for the few items that do fail on me.
When I advised my aunt to buy an eMachine - due to her budget and my young cousin’s burning desire to have a PC to plonk around on - I also advised her to get the extended warranty. The machines were by nature a POS plus with a kid banging on it, well, disaster loomed.
She went through 3 eMachines before they stopped blowing up, but it was well worth the price of the warranty at the time. Never cost her a dime to replace.
Everybody seems to have a story about how their extended warranty saved them at one time or another. But these stories have the “Vegas Winner” flaw in them.
People like to tell about the big jackpots and winnings they brought home from Vegas. But they neglect to tell you about the 10 other times they went and lost money.
Extended warranties have the same flaw. The payout is never more than the house take. Somebody who bought them on his washer/dryer, big screen tv, laptop, and digital camera and ends up using the one on his laptop will think “Awesome, the warranty really saved me” but fails to see the amount spent for the five warranties outweighs the one time repair cost of the laptop.
The other MAJOR problem I have with them is they cover the “honeymoon” period of a products lifespan. Products either fail immediately from a manufacturer defect (and will be covered by the 90 day or 1 year manufacturer warranty) or they will last 4-5 years and then a part or component will go bad from normal wear and tear.
That “honeymoon” period is statistically the time least likely for a product to fail.
I had an LCD projection set with a defective circuit board at the 6 year mark. I also had a washing machine go bad at 8 years and a car radio burn out at 5 years. The extended warranties wouldn’t have done me a bit of good.
We bought one on our last tube TV as it weighed a couple of hundred pounds and once we got it down in the basement I didn’t want to have to carry it out to bring it in for service.
Worked in our favor as the set was a dog. After 3 service calls in 2 years failed to correct the problems, we were credited the full purchase price towards a new flatscreen.
We are more likely to buy them for “new” technology, as we expect them to have a greater share of glitches.
This is exactly it. If it will cause you a financial hardship to have it fixed or replaced, then get an extended service contract on it. I don’t buy extended service contracts on small appliances or TV’s or the like because I could replace the items fairly easily and on my own time frame. I do buy them on cars because a repair is likely to put a strain on my monthly budget and probably can’t be put off to a month when things are better. I need my car to get back and forth to work. I can live without toast for a few days.
I also purchased a protection plan for my iPhone because the price was reasonable and I am likely to need it. I also can’t be without my phone for an extended period of time.
When I bought my new washing machine, I got an extended warranty. I tend to be very rough on washing machines for some reason (and no, I’m not overloading it with clothing) and have gone through three washers in about 15 years. Sure enough, two months after the regular warranty would have run out, the washer started making a weird sound. Because I bought the extended warranty, I called the repair service, who came out and fixed the brake. For me, it was worth having the extended warranty, knowing that anytime my washing machine makes a funky noise, all I have to do is pick up the phone.
I’d also buy one for a car if it was an option. (Wasn’t an option when I bought my used car.) Repairs tend to be expensive and I’d rather not have to cough up funds to repair something expensive and surprising.
A LOT of the profit from these things (though not all of it) comes from people who buy the extended warrenty - then don’t have the paperwork/don’t bother to actually use it/forget they bought it/decide to purchase a newer model anyway - when their item DOES break.
So while the company selling them to you will make a profit off them - if you purchase them intelligently and USE them - its a much smaller profit than you think.
(Washing machine - washing machine is a big one. Anything where there are a lot of parts to go wrong and where having to purchase new would send finances into some distress.)
Keep in mind another trick with extended warranties is that they cover one replacement, and then you have to buy the warranty again. My wife bought me a wireless speaker for Christmas last year, it died before springtime came around. I took it back, and they gave me a replacement, and then said that if I wanted to keep the protection going (it was a 2 year protection plan) I would have to buy another plan at that point.
So, read the fine print. If you’re buying a shit product and they replace it this way, you likely have another shit product that’s doomed to failure in the same way.
When the regular warranty doesn’t extend into the constant failure regime in a bathtub curve. I disagree with Dangerosa in that a LOT of the profit comes from people who buy and don’t use the extended warranty; I’ve read that the profit comes from people buying extended warranties that end right before the increased failure rate is expected to begin.
So, does it make sense to get an extended warranty on a Blackberry? They get moved around much like laptops do, but they probably don’t have to take the same level of abuse.
I will never forget the time a fast-talking salesman convinced me to buy an extended warranty on a high priced tuner. My first hi-fi, which I built from a dynakit around 1960 was still working fine (I imagine it would still work if I could replace the vacuum tubes), but it wasn’t stereo and I expected that this new one would also last nearly forever. When the salesman started telling me how fragile this set was I should have just walked out. Instead, I bought the damned warranty. Funny thing was, he was right. It broke down a few years later, but the store was out of business by then so the warranty was useless. Just wish I had walked out. Would have served him right to lost a commission over pushing the warranty too hard.
IIRC, the only things that really need extended waranties are laptop computers and HDTVs (though the latter may now be more dependable).
For a laptop, it’s a good purchase, especially if you have something like the Dell Complete Care, which will fix broken screens or keyboard that have liquid poured on them. My daughter was able to fix her computer twice under the program (not from Dell), once for a broken USB port and the other after spilling water on the keyboard. If you’re a college student, it makes all kinds of sense.
But, in general, they are bad buys. And they can make a ton of money for the person offering it. I’ve seen warranties for a TV that cost more than buying a new one.
When someone tries to sell me one, I always ask, “Is this thing so poorly made it won’t last for longer than the manufacturer warantee period? If so, void the sale. I’m not buying junk.”
You’d be surprised how quick they are to drop the subject.
I got one (5-year) for my computer. In five years, it’s very likely that some part will break down anyway, plus I have a 2-year-old in the house who’s fascinated with gadgets. Plus, after five years I won’t be that upset if it breaks down since I’ll be looking for a new one anyway.