Are Extended Warranties Worth It?

[Chris Gohlke]

<div class='os_post_top_link'><a href='http://www.pcworld.com/resource/article/0,aid,124856,pg,1,00.asp' target='_blank'>http://www.pcworld.com/resource/article/0,aid,124856,pg,1,00.asp</a><br /><br /></div><i>"PC World decided to find out. We surveyed readers to discover how many of them purchased such warranties and how satisfied they were with the service they received. Of our 2031 respondents, 63 percent said they had bought extended warranties; 90 percent of those who used the warranty said their request had been honored with either service or a replacement product. And 80 percent of those who received help said they were satisfied with the outcome."</i><br /><br /><img src="http://www.digitalmediathoughts.com/images/124856-2405p091-1b.jpg" /> <br /><br />Overall, I think extended warranties are a rip. They are basically insurance. Insurance makes sense when you can't afford the cost of replacing an item in the event of a failure, like having insurance on your house. Assuming you buy coverage on everything, sometimes it would be a waste because the product would fail and sometimes you would win because it would cost more to repair than you paid for the warranty. But, like Vegas, the house always has the advantage. The cost of an extended warranty is based on the expected average expense per policy plus a profit margin (pretty hefty in most cases). By and large, I think you are best off forgoing the extended warranty and banking the money that it would have cost. Over the long term, you should be able to pay to have any broken items repaired and still come out ahead.

[Darius Wey]

I was waiting in a line to pick up my Xbox 360 yesterday morning, and during that time, a store rep went around asking if anyone wanted a two-year extended warranty for $85. Of the 40-odd people that were asked, only one or two went with it. While it's too small a sample size to make a firm judgement, I think more people are starting to realise that the money is better spent elsewhere.

[Jake Ludington]

I used to think the extended warranty was a rip-off, but I've changed my mind for some things. I still won't buy one for anything under $500 but I won't be caught dead with out one for any laptop I own. I'm currently on my 3rd laptop since mid-2003. The two previous laptops both had failures of various parts that resulted in repairs easily exceeding the $250 I paid for the extended warranty. A bunk laptop hard drive alone is worth that and seems to happen more frequently than anyone pays attention if you search online forums. Had I not purchased the extended warranty, I would have been out over $1000 in parts and labor or I would have spent twice that on a new laptop. Maybe that's in your budget on an annual basis, but the $250 looks like a better deal to me. ;)

[Chris Gohlke]

Were they mocked by the others in the line?

I will say, back in the day when you could haggle at Best Buy, I'd throw out that I would buy the extended waranty as part of a package deal that included lowering the price. When they bit, it would work out the the waranty was nearly free. They've pretty much stopped doing that now.

I did this on a laptop about 3 years ago. Ended up paying like $10 for the extented warranty. Interestingly I got a renewal in the mail a few weeks ago. They would add another two years for ONLY $420. I find this absurd because even the cheapest of current laptops outspec the three year old model and with a good sale can be had for about that price. Wonder how many people go for it?

[Felix Torres]

Dunno, this isn't a b&amp;W issue.

Yes, extended warranties are insurance.
And, like all other kinds of insurance, it matters *what* you are insuring and *what* kind of coverage you get for the amount spent.

Personal life insurance is usually a good bet if you actually care what happens to your family after you're gone.
Car insurance is a good idea, even where its not mandatory.
Home owner's insurance, usually.

Equipment insurance?
Again it depends.
A $20 warranty on a $40 DVD-player is stupid.
A PC is probably not worth insuring cause it is usually readily repairable.
But bigger-ticket items?
Sometimes it makes sense.
Especially if the tech is new/unproven or from a supplier with a short history: A Panasonic/HP product is less likely to need insurance than a second-tier product, if nothing else because if it breaks out-of-warranty you can have it repaired. That is not always the case: for example, I've heard some horror stories (justified or not) about DELL HDTV parts availability.)

Some expensive products have failure modes that simply can't be repaired. If the product is not reasonably repairable and the replacement cost unbearable within the target lifetime of the warranty, then the warranty would be justified.

It is all up to what the customer considers bearable: I'm pretty sure Bill Gates *never* buys extended warranties. ;-)

[Jeremy Charette]

It all depends on manufacturer warranty coverage. In the case of the Xbox 360, the factory warranty is only good for 90 days. Given the fact that the 360 has had some documented reliability problems, is a fairly new product (i.e. still has high potential for bugs), and that the initial investment cost is so high, I think an extended warranty is a valid thing to consider.

For something established and reliable like a tube TV set, or a CD player? Not so much.

If it's new and unproven, I'll get the warranty. Otherwise, like Chris said, the house always wins.

[Darius Wey]

Were they mocked by the others in the line?

I will say, back in the day when you could haggle at Best Buy, I'd throw out that I would buy the extended waranty as part of a package deal that included lowering the price. When they bit, it would work out the the waranty was nearly free. They've pretty much stopped doing that now.

Amusingly, the rep tried to sell the warranty off at $10 at first (which I would have gone with), but the manager intervened and said it wouldn't happen. That's when people started shaking their heads.

Edit: Oh, and as for the mocking, I saw a few cheeky grins here and there. ;)

[Darius Wey]

It all depends on manufacturer warranty coverage. In the case of the Xbox 360, the factory warranty is only good for 90 days. Given the fact that the 360 has had some documented reliability problems, is a fairly new product (i.e. still has high potential for bugs), and that the initial investment cost is so high, I think an extended warranty is a valid thing to consider.

In Australia, standard 90-day warranties are rare. They're often at least one year, as is the case with the Xbox 360. Considering that, I can understand why a lot of people here tend not to commit to extended warranties.

[egads]

I just purchased a $1000 HP multifunction color laser printer. I got a 3 year extended warranty for $50. For a printer will all of those moving parts i did not think $50 was too out of line...

[Damion Chaplin]

Hmmm... I don't know.

For some people the extended warranty is a steal. One of my bosses, for example, bought a Palm 5 years ago from CompUSA. He bought the 3-year extended warranty. 2 years ago, when the extended warranty was about to run out, he 'accidently' dropped his Palm and killed it. He took it to CompUSA, who of course was no longer carrying that model, and they replaced it with a newer model Palm. At the same time, he extended his extended warranty. Now his extended extended warranty is about to run out again. Every time he whips out his Palm, he mumbles something like "Gotta drop this thing soon." :)

Personally, I tend not to buy my equipment from vendors who even offer extended warranties. I've never bought an extended warranty because I always thought they were a waste. But certainly for some people it's worth it.

[Jeremy Charette]

The best warranty I ever saw was from a place in Rochester NY called "The Stereo Shop"

http://www.stopattheshop.com/service.html

Lifetime labor is $5. That's it. No deductible.

Items under $200: 10% of the original price gets you lifetime replacement. If they don't have unit in stock the same day, you get a loaner while they get you a new one. Beat that.

Items over $200: 10% of the original price gets you 5 years parts and labor. Same problem 3 times in a row, you get a brand new one, or comparable.

I used this warranty over 10 years ago on a Sony Discman. Within a month the display crapped out, they gave me a new one, no questions asked. Two years later it wouldn't read discs, they sent it out for service, a week later it came back good as new, no charge. I think the warranty coverage cost me something like $7.

To top it all off, they price match too.

Which reminds me...maybe I should get a new flat-screen TV from them...

[Felix Torres]

In Australia, standard 90-day warranties are rare. They're often at least one year, as is the case with the Xbox 360. Considering that, I can understand why a lot of people here tend not to commit to extended warranties.

Out of curiosity: is there a local law "protecting" consumers from short standard warranties?

[Outlaw94]

It really depoends on the purchase. A desktop PC with parts that are easily user replacable, no. I laptop with many parts you can't replace yourself, yes. I had purchased a three year warrenty with my first dell laptop and I went through two harddrives in about a three week period after the origional warrenty would have expired. Was the extra $300 worth it? To me, heck yeah.

Small electronic you frequently carry with you (ex. PDA, cell phone, mp3 player) that run a higher possibility of being damaged, probably. I tend to go through cell phones quickly so to me the warrentty is well worth it.

I tend to be vary careful with anything I have and usually don't have any issues with warrenty work.

[ctmagnus]

Depends on the item. Pocket PCs and laptops, I get the extended warranty for. Droppage factor, I guess, combined with the type of info that tends to be kept on them. But for stereos, TVs, MP3 players, cell phones, I don't bother. When I replace my iPaq 5550 with a Phone Edition device, I'll guess we'll see. ;)

[Jason Dunn]

...when the extended warranty was about to run out, he 'accidently' dropped his Palm and killed it.

Gee, and we all wonder why the warranties are so expensive - they have to factor in unethical fraudsters like your boss. Not cool. :evil:

[Jason Dunn]

Like everyone else here, for me buying an extended warranty depends on what it is. Under $500? No way. $2000 desktop PC that I can replace parts on myself? No way. $3000 laptop with parts I can't replace? Definitely. I think it pays to be smart.

I've also noticed that a lot of extended warranties are getting "cheap" now - the stores make you wait 90 days for parts before they'll replace it, or they have to fix the same problem a minimum of three times before they'll replace it, etc. I get the feeling though that things are better for the consumer in the USA than in Canada. Our extended warranties here are kind of lame. :roll:

[Darius Wey]

Out of curiosity: is there a local law "protecting" consumers from short standard warranties?

I know that as part of the provision of goods and services in Australia, the Trade Practices Act must be followed in almost all cases. Whether it forces manufacturers to offer at least a one year warranty is something I'm unsure of, because the document is far too large for me to filter through.

What I do know is that consumers have a lot of rights here, and it's up to the manufacturers to ensure that ample consumer satisfaction is derived from a particular good or service. Perhaps a minimum one year warranty is a part of that, because in my opinion, 90 days is far too short to offer consumers any peace of mind.

[Felix Torres]

Out of curiosity: is there a local law "protecting" consumers from short standard warranties?

I know that as part of the provision of goods and services in Australia, the Trade Practices Act must be followed in almost all cases. Whether it forces manufacturers to offer at least a one year warranty is something I'm unsure of, because the document is far too large for me to filter through.

S'alright...
Lots of places have Consumer protection laws.

Just curious, cause regulation has consequences.
For example some locations in Europe (Britain among them) mandate 3 year warranties for electronics. This is, in effect an extended warranty mandate, so consumers are pretty much forced to buy the warranty, which is rolled into (and hidden) into the product price. No consumer choice, informed or otherwise, involved.
Of course, lots of consumers there wonder why *they* can't find $30 disposable DVD players (or US-style bargains) in their home markets. 8)

Reducing risk always reduces choice; extended warranties are about letting consumers choose the level of risk they are willing to assume. Some products and services are hard for consumers to properly gauge risk (medical/legal services) so consumer protection makes sense for those services (licensing, malpractice laws) but for some products, especially in electronics, mandatory extended warranties are counter-productive. (Wal-Mart carries a line of $1 FM stereo radios in their stores; earbuds and all. Even a 1 year warranty would kill such a product, even though no consumer would care if the thing died after a week. (In fact they don't; they are single-chip devices that are quite reliable and cheap/easy enough to use to give to, say, a 5-year old kid. :-) )

Similarly, automobiles come with different warranty levels; here in the US, the Honda Acura line of premium cars come with three year warranties (extended warranty an option) while the entry-level Hyundai's come with ten year drivetrain warranties. (Extended warranty included in the price--very low--no choice.) Both coexist, cause most consumers understand the risk of the products, and don't need to be protected from choice.

Different people (and, obviously; societies) have different levels of tolerance for risk but it is not always understood that legislating/regulating risk has a literal price, and not always just in money. Some people/societies are willing to accept a certain amount of risk in the name of savings and/or efficiency, while others seek to elliminate all risk even at the cost of freedom of choice.

Warranties are like all kinds of risk in life: all about choice; sometimes you get it, sometimes you don't...

Worth thinking over, no?
Good thread.

[Fitch]

Nobody has mentioned the <font size=+1>Credit Card</font> extended warranties yet. There are tons of credit cards like American Express and Citibank cards that offer a one-year extended warranty, and for AmEx, they will extend a manufacturers extended warranty on notebooks. I didn't think it would be that useful, but:

American Express gave me all my money back for my Canon S400 almost 2 years after I bought it, it was enough to buy an S410 and have change!

I did by the Fujitsu Laptop 2-year extended warranty (it had to be the brand's extended warranty). After that ran out, the AmEx one kicked in, I got $550 dollars of repairs done on my broken DVD-ROM drive, and they had to upgrade it to DVD-RW because the ROM was hard to come by.

So I recommend buying your electronics with one of those cards. VERY VERY worth it, you don't pay extra (unless you extend the extended)

[Jason Dunn]

Nobody has mentioned the Credit Card extended warranties yet.

Great point Fitch! My VISA "platinum" card (it seems everything is a Platinum card these days, so the term seems silly) has warranty doubling on all purchases, to a maximum of two extra years I believe. I haven't had to use it yet, and I'm kind of doubtful it will really come through for me, but it's good to hear that it worked for you. It gives me hope! ;-)