Release Notes: Sometimes It's Good to Buy the Extended Warranty

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Slugbait

Almost 20 years ago, I worked the back room for Silo (the precursor of Best Buy, etc). The "extended warranty" thing was called out by Consumer Reports way back then, too. And I believed them. Of course, sales people are trained to always ask if you want to purchase an extended warranty on every single purchase...even a $20 Walkman-wannabe or stereo speakers.

And yes, the sales people knew what was up...but they told me there were basic rules to follow. If the device has a laser (CD player, LaserDisc player), a lot of moving parts (8mm or C-VHS camcorder), or high-end audio: you buy the extended warranty. That advice saved my tail with a lemon CD player (free upgrade replacement), a lemon camcorder (full refund, including ECC), a lemon ES receiver (free upgrade replacement), and fixed my LaserDisc player (which, yes, I still have...it's sitting on the next shelf above my MCE machine, and it gets almost as much use as my H/K turntable). My televisions, my HT speakers, computer monitors, washer/dryer...no extended warranties, all worked fine when I had to give them away.

Would I buy an extended warranty for my Walkman W580i that I got for free with signup? Hell no. Would I buy it with a much more complex iPhone that I had to spend c-notes on? Hell, yeah.

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jcollins

So your first gen iPhone failed after roughly two years of constant use?  I don't know about anyone else, but that's pretty damn good for a high tech phone.   My phones all have had some sort of issue/failed getting on to two years.

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suckyn00b

I guess if your really hard on your stuff and you break crap all the time, then extended warranties might be worth it for you.

 However, I think what some people forget to mention or think about is when dealing with technology gadgets, more often than not, by the time you need an extended warranty, the technology is so out of date that 1. its cheap to fix or 2. its outdated and you need to update anyways. Just like your iPhone example. Your phone died just in time for the new iPhone to come out. Im not saying you would have necessarily replaced yours immediately if it hadn't died, but its a good example of a new technology replacement before the extended warranty is used.

And I definitely agree with the guy who said "They sell extended warranties because they make money on them. They wouldn't sell extended warranties if it cost them money."

How do you think Apple prices their $99 iCare package? They know what their costs for the average fix/person and then put a mark up on it....its a guaranteed cash generator.

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jcollins

Actually, his phone died in time for the third generation of iPhone...  So he's two updates down the line.

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Yusonice

I remember reading this very long agoo in the mag... was it last year?

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bosunj

Your article quite accurately illustrates the benefit of Duhmericas unique brand of capitalism: FU Capitalism. Ain't it grand!

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DBsantos77

I dunno Will, personally it depends on the product.

My HP DV5-1235 Laptop has no warranty, no problems thus far but I set up an invisible bubble shield around it.

My Xbox 360 definitely has a warranty, it's the Elite so there's no way that $500 is gonna go down the drain again, 2 years of warranty, no problems thus far.

My Sony Ericsson does have a 1 year warranty but it's pretty much done this September, I've only had to swap it once.

I also bought an external hard drive from Newegg, the drive is from SeaGate, I definitely got a 1 year warranty because of complaints on temperature issues, about a month after usage.

All in all I think it depends on the product. I handle it on a case by case basis. Just to be on the safe side I do consider a warranty important though. K I'm off my laptop because I have 6% battery life and vista will hibernate.

 

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Mikeyboy

No, no, no, no.

It DOESN"T depend on the product. Extended warranties are statistically ALWAYS a bad idea. These companies do not sell them to lose money. In fact, Best Buy makes NO money from selling products. They only make money by selling extended warranties. Did you know that?

Here's the deal. Many here have fallen hook, line, and sinker for faulty logic. The "I know a guy" argument. You can always find one person in a group who beat the odds - someone who is glad they bought the extended warrranty. However, statistically, you will never, never, never, never end up ahead by buying these things. They're junk. If you want to place a losing bet, then buy one. But you're acting without wisdom. 

Again, stores don't sell extended warranties to lose money.

 

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GodFix

I must be the one guy that beats the odds. Everytime I buy anything from Best Buy more than a certain dollar amount, I get their warranty plan. In 10 years of buying TVs, radios, cameras and PC components, it has always paid off that after the factory warranty has expired and I have about 1 year left on the BB warranty, something goes wrong and I get it fixed (or replaced) for free. Without that warranty, my only option would be to buy a new one. $150 warranty for a $1500 item is worth it to me.

Then again, it's nothing more than insurance and luck of the draw if you'll ever have to use it.

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Mikeyboy

I bet that you also like to tell the story about the time you went to Vegas and won $10. Fine.

But over time, the house always wins. Extended warranties are the same way. Nothing you've written changes the logic. Extended warranties are always bad.

If you want to make a valid argument, use logic, not individual events to make your point.

By your logic, all blue cars are reliable - since my blue car works fine.

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nekollx

 my laptop had a one year warentey, with 4 years of extension

i'min year 3 of 1 year at a time extensions

in that time:

The mother board has died twice

the sodered on video card 3 times.

the ram once

the display once

and the entire unit was replaced once.

 

I didn;t pay a dime because of the extended warenty

------------------------------
Coming soon to Lulu.com --Tokusatsu Heroes--
Five teenagers, one alien ghost, a robot, and the fate of the world.

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Mikeyboy

I give up.

The concepts of Reason and Logic are crying right now.

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awhadford

Of course Best Buy is going to make money on Extended Warranties, because Best Buy is in the business of making money.  They simply would not sell a product if it is unprofitable.  That doesn't automatically mean that its a bad investment on your part.  I may or may not have the money to replace a piece of equipment at the time it breaks, because I cannot predict when and if I will need to replace it.  Furthermore, that piece of equipment may be so vital to my life or work that being without it for any length of time would be undesirable (and in rare cases, costly). 

If it breaks at the most inconvenient time (which it will), an extended warranty allows me to get it repaired or replaced NOW, whether or not I happen to have funds on hand.  No warranty means I'm either going without my toy, or skipping a few meals to replace it. So the gamble is this:  Do I skip the EW, and take my chances that WHEN my device breaks, I'll be able to replace it out of pocket with little downtime? Or do I plunk down another $100 now, when I can prepare to spend it, so that WHEN my device breaks, I am covered and can have my replacement ASAP?  And the variables involved when answering that question are not always black and white.

Just like auto insurance, extended warranties rely on the idea that 90% of the people who pay for the service will never use it.  But for the 10% who did use, I guarentee it's the best investment they ever made.

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Mikeyboy

The general concept you are stating is not wrong - however when applied to ALL tech items, you are very wrong. You are forgetting many things:

1. Literally EVERY consumer advocate on TV, radio, and print say that
extended warranties are a terrible deal. Even if you think I'm full of
it, you need to explain to me this point. WHY do they all agree? Why do
you disagree with all of them? Explain that. We'll wait.

2. The price of tech items (especially big TVs) go down all the time. You can buy a better TV for half the cost now than 2 years ago. Tech items that drop in price like this are perhaps the WORST candidates for an extended warranty.

3. You assume that you will have no problems convincing the store that you did not damage the item yourself.

4. Best Buy and others SELL the extended warranty to another company for pennies on the dollar. They pocket a big sum of cash, and have another firm handle all the risk. Best Buy is making money - the 3rd party is making money - and yet somehow getting an extended warranty is a good deal? No.

5.Most stuff (like appliances for example) last a long, long time with no problems. If you buy good stuff, your chances of having a problem are greatly reduced.

On the up side: You are correct that you may be without a TV if you DON't have an extended warranty. That point is correct. I'm just saying that this inconvenience will cost you a far greater percentage of your income than any alternative.

Extended warranties are not a financially, statistically, or logically coherent thing to do. And that you cannot argue.

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nekollx

 will it really cost you though?

3 years ive had this laptop and my details of the replacments are above. Its curent value is $600 bucks for a new item but in thee years i've paid half that. and lets not forget the cost in time to migrates all your data to a new system.

But it's value wast 600 last year, or the year before. The replacment cost inthe first 2 years would have been much higher, much much higher.

------------------------------

Coming soon to Lulu.com --Tokusatsu Heroes--
Five teenagers, one alien ghost, a robot, and the fate of the world.

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awhadford

1. I will be happy to attempt to explain why EVERY consumer advocate on TV, Radio, and the Internet say that extended warranties are terrible deals, as soon as you are able to cite EVERY consumer advocate.  Go ahead, I'll wait. 

In the meantime, JD Power seems to agree with me. So literally may be an exaggeration. Oh, and while he is not a consumer advocate, I think that Will Smith may have a bit more credibility in this field than most.

2. The price of tech items does fall, and falls quickly. This is why you should not BLINDLY get whatever warranty Best Buy wants to sell you, and why you should always weigh whether or not the extra coverage is worth it to you. It is equally wrong, however, to BLINDLY say that ALL extended warranties are inherantly bad without researching every one.

3. Citing point #2, research the coverage you are purchasing. Make sure the replacement policy is what you would like it to be. I cannot assume that Best Buy (or whoever) will not try to cheat me out of coverage. but I can do my homework and protect myself from dishonest companies.

4. The logic that states "Best Buy is making money - the 3rd party is making money - and yet somehow getting an extended warranty is a good deal?" is flawed. You may as well say that apple farmers are evil because they charge more for their apples than it costs to grow them. Companies make money, it's what they do. Just because there is profit to be made does not automatically mean it's bad for consumers.

5. You are correct, and that is part of the gamble. If you believe that you can buy a superior product, and forego any additional coverage, by all means do it. Personally, especially with large appliances, I want the most coverage I can get out of it. And while I may be able to live without a TV until I can afford a new one, I am not going to be able to do without my refrigerator for more than a couple days. An extended warranty may end up saving me alot of trouble and immediate out of pocket expense. Or not...that's the gamble.

So in the end, while "the house is always going to come out ahead", and for many situations "Extended warranties are not a financially, statistically, or logically coherent thing to do", I believe that I have sucessfully shown that the Gospel According to MikeyBoy may be slightly less than irrefutable.

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Mikeyboy

Look, it's clear that you've purchased extended warranties, and you want to justify that decision. But your arguments hinge on only one point - it's worth the extra money to ensure that you always have a TV, fridge, or whatnot.

I'm simply here to tell you that your sentiment is understandable, but economically not smart in any way.

Insurance is fine. Something really bad happens? Your life isn't ruined. 

What if that insurance cost 500x what it should? Still worth it?This is the point being missed.

When stores charge 20 times the payout rate on insurance, then you're being ripped off.

Rather than buying the extended warranty, put that money in the bank. Then, if your TV dies, you'll be fine. After about 5 purchases, you'll have a never-ending supply of cash, since statistically, not all of your stuff will fail withing warranty time.

I see what you're saying, but it's based on falacious reasoning.

PS - Clark Howard, and Consumer Reports agree with me, and I know of nobody that says EW's are good. JD Powers certainly doesn't recommend them.

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mesiah

"Not smart in any way" would be categorically denouncing something all together. While in most cases extended warranties are a bad idea, there are absolutely  cases where they ARE a good idea. Like the above poster wrote, you need to weigh the pros and cons and decide. But if you are so intent on winning this argument as a whole that you are blind to what anyone is saying, I will give you a few examples.

People who have very physical jobs are prone to damaging their cell phones often, if they can't afford to be without their phone for more than a day, a protection plan is a very good idea because it WILL break sooner rather than later.

Rear projection television, although they have come a long way, they used to be highly unreliable, with failure rates in the first 6 months ranging between 17 and 42%. If you had a standard warranty you were stuck either trying to ship a huge television back to the manufacturer, or paying a technician to repair it for you. OR, you could purchase the protection plan and have it repaired in your home for free.

I use headphones every day, I tend to be very rough with them, and sometimes go through as much as 1 pair a month. I finally decided last year to buy a replacement plan for my headphones. In 10 months I have gone through 4 pairs of headphones, but I only paid for 1 pair and $15 for the waranty. I knew the house wasn't going to win on this one, and it was absolutely the right choice.

The last example isn't necessarily something you should do. But I have a friend that used to be a manager at our local best buy. He gets an extended warranty with every piece of electronic equipment he buys. Sounds stupid right? Well, usually about a month before his warranty is up, he purposefully blows up the device and takes it back for a new one. He makes sure he gets his moneys worth out of his warranty. I'm not saying you should do that, or that it is morally or legally right. But in his case, the warranty is worth it every time.

Now, instead of calling everyone that gets a warranty stupid, and using the reasoning "because the media says so" why don't you tell my why each of these examples is stupid (except for maybe the last one :P) I'm interested to see what ridiculous reasoning you will use, or if you will just go back to the old"because you're stupid" standby.

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awhadford

No, chief, that is not at all my point.  It seems you are so hellbent on being right that you are spending less time reading what is in front of you and more time thinking about what you are going to write.  You need to stop that.

The point I am making, and if had bothered actually reading the article I linked you'd see that JD Power does agree, is that you cannot, in one fell swoop, say that all extended warranties are without merit.  The point is that you must weigh the pros and cons of each side and make an informed decision.  Obviously, there are going to be warranties that are A)poor investments and B)completely unecessary.  It may even be the rule more than the exception.  For example, I see no point in buying an extended warranty on a phone that cost $100 and has been designed to be obsolete in 2 years.  The phone's primary warranty will cover it at least the length of the contract, and by the time the contract is up you'd be better buying a new phone. That would be a perfect example of what you are saying; which is it does not make financial sense to purchase an extended warranty.  Not everything is as disposable, or replaceable, as a phone.  You can't apply the same rules to every purchase you make, because each major purchase is a unique experience.

You compared TVs to refrigerators.  Apples and oranges.  If I lose my TV, and its not covered under warranty, my livelyhood will not suffer.  I'll read a book, or listen to the radio, or have asinine arguments on the Internet, and replace it when I have enough money.  I'll live.  If my refrigerator goes, however, now we have problems.  For starters, I lose my food investment, and that is money lost.  From there, if I can't get it fixed in time, it may start leaking and causing damage to my kitchen floor, which is more money.  And if my kitchen floor can't be repaired in a timely manner, we end up with a mold issue, and I can't fix that with melted popsicles.  These are problems, and for the small amount of foresight that looking into an extended warranty requires, they are very simple problems to avoid.

And, finally, refrigerators (or cars, or in cases of business: computers) are not items that I am willing to just let burn out and replace willy-nilly.  I need these things, and cannot allow bad luck or expired warranties take them from me.  They are not toys; they are required and must work at all times.

So, while you may be in the lucky position to be able to replace all your major appliances at any given moment, most of us are not.  And to say, with clearly no idea what you are talking about, that ALL extended warranties are bad investments shows that you are likely just parroting things you hear on Sunday afternoon talk radio.  All I'm saying is that you cannot make blanket statements like ALL ARE BAD or ALL ARE GOOD, and that each situation requires rational though and proper research.  This does not mean always buy the EW, which is how you are interpreting this, but to make an informed decision about the next EW you are offered.   

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nekollx

 and your assuming a person would buy 5 extended items. My house came with a stove and fridge. my TVs are inheritied my only big purchase was my laptop. Would $100 be enough to replace it as new with a comparible model when it died in year 2? 

------------------------------
Coming soon to Lulu.com --Tokusatsu Heroes--
Five teenagers, one alien ghost, a robot, and the fate of the world.

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DBsantos77

Lmfao! Longest frickin friendly-arguement I've ever read.

Oh by the way, the 1 year warranty from Newegg and ServiceNet begins AFTER the manufacturers ends, so it's not a lost cause, I basically paid for 6 years of warranty on the SeaGate drive instead of 5. Not bad I'd say. It was only $11.

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lostcause64

I understand your pain, Will.  When I read the article recommending to not buy extended warranties, I took it with a grain of salt, as I was working at Best Buy's Geek Squad at the time. MaxPC is directly responsible for my technical prowes, which made me capable of landing a tech job without going to school. I even took issues to work with me for reference on the job. I left GS 2 years ago this month after 4+ years, and to this day I'm still the only one in my old store to get food, like cookies & strawberry cupcakes, from customers on a regular basis. They were so loyal that my coworkers nicknamed them the Fan Club. But it was hard to go with your recommendation on extended warranties. Because I'd seen so many people that couldn't afford repairs on whatever device they had, that I would have been able to help if they did have the warranty. Don't get me wrong, they warranties can be a hit or miss thing, especially depending on who's selling it or what it's for, but in some cases, like your phone or a laptop battery/power supply, they work. People just need to do some research and make a good informed decision. And don't just take for granted what the salesman tells you about the warranty...

John

Have you ever wondered why intelligence can normally be found in an individual, but runs screaming in terror from a group? Though, there are exceptions...

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BroadSide

My visceral spine tingling quickly gave way to feelings of sadness and pity as your story of storming away and then returning head hung low to the Apple compound unfolded. I was about to compliment your liberation from the clutches of the hypocrippies who preach love the World but practice aesthetic over function and choose to pollute the Earth with the dead and dying carcasses of Ipods and Iphones all for the want of a replaceable battery or two.

Surely you meant software not hardware?...

I use to envy Macs for OS10 but you can install it on a PC now so there's nothing left to covet.

Be strong. Do the right thing.

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jamesrascal

Extended warranty

Recently the power brick for my HP laptop died. I called HP to see if I could get it replaced upon calling HP and finding out that my warranty was out by three days I set out to find myself a free or cheap replacement. I searched Amazon and other sites. Prices ranged from $20 - $120 a little bit much for someone that has no job ATM. I took the next step found the original receipt and called wal-mart (store of purchases) After about 20 minutes on the phone I have a new charger coming in the mail free of charge.
 
Over all my $598 laptop will live to see another day of life all for a well spent $20. This got me thinking and whenever I will go out to make an expensive purchased I will always be sure to get the extended warranty. The part I thought was the best is all of the questions they asked me where about my location and where I bought the pc and what was wrong with it. This was much better than the 1600 questions AT&T asks when trying to get a new phone.
 
JR

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COMMANDER_COOK

The iPhone may be hot, but you have to remember that Apple wants you to buy a new one every year.

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