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Do You Buy Extended Warranties?
Stackdump asks: "I am a college student (senior seeking CS BS). I work partime at Best Buy selling computers (arg!). To be truthful I don't really sell computers; I sell what we call 'performance service plans' or PSP's for short. This is the somewhat gimmicky name given to Best Buy's extended warranties. To be fair they do actually provide some service in the store, swapping HDs, CDROMs, and so forth, but most of the hardcore repairs are done elsewhere or by the manufacturer. Prices range from $99 on the cheapest tower to $249 on laptops over $1000. Terms of service are pretty simple everything is covered against power surge, dust contamination, whatever... BUT abuse is not covered: so slam a pencil in your laptop and say byebye, but fry your computer because you don't have a surge protector and you can get a new one. As this is the central pre-occupation of my work day I ask the Slashdot community this: do you feel these warranties are really worth the money?"
No, they aren't worth it. They are a tremendous profit margin for Best Buy, which is why you even get a commission (which you failed to mention) for selling them. The high pressure sales tactics some people employ to push these things thoroughly sours my shopping experience in what should be the equivelant of my toy store. They are much like rebates, they are great for the vendor because people usually don't collect on the value they purchased. It's all a statistical formula at the end of the day. It does appeal to a specific market segment and demand, or else no one would buy them.
They are a scam. Salespeople are under incredible pressure to sell them -- try telling the salesperson you don't want one! They will beg and plead with you and ask you "why" -- they have to put down a reason. Say, "I just don't want one." They will go nuts. The so-called "extended warranty" is way overpriced and full of loopholes and exclusions. They are a major profit center for the big consumer electronics chains of this world. Most products already come with manufacturers' warranties -- the product will either fail within the original mfr's warranty period or it will outlast the "extended" period. And if someone dumb, like your grandma, buys an "extended warranty," good luck finding the sales receipt or other information -- most of us aren't that well organized.
You are in the business of ripping off dumb people and people who are vulnerable to high-pressure sales tactics and techno-fear pitches.
Your soul is probably in hock already, I advise quiting before you loose it entirely. Honest work can still be had at fast-food joints, even in this economy.
P.S. When you get another job, do not:
- sell cellular phone deals
- insurance
- real estate
- stocks
You are badly in need of some honest job experience so you realize that you can do stuff for people, who pay you money, and you both benefit, no lying or pressure involved; this will stop you from thinking the whole world works like Enron and sying early, bitter, and disillusioned. As a college kid you might look into getting weekend work painting houses or mowing lawns.
Best Buy wouldn't sell these if they didn't make money on them. If they're making money on them they pay out less than they collect. Therefore, over the term of the warranty, you're less likely to receive the money you paid for the warranty back in terms of repair cost than not.
;)
So if it's not a good economic proposition to buy a warranty (insurance), why does anybody do it? Well, on a house or a car, you can't afford to cover the cost of a loss, or a lawsuit (auto liability). If your house burns down, you can't afford to just buy a new house, but if you really could it wouldn't make sense to pay homeowners' insurance because the odds that your house will ever burn down are really low.
With a computer, or a TV you can usually afford to cover the cost of a loss, so, the odds are in your favor to not buy the warranty.
That said, Staples offers a nice warranty - any problems whatsoever and you get a Staples cash card for the original purchase price of the item, no questions asked (I even read the fine print). So, on my $89 Palm I paid $10 for the warranty, since it might malfunction by time I need to upgrade.
My God, it's Full of Source!
OUTSIDE_IP=$(dig +short my.ip @outsideip.net)
I just fix it myself.
On expensive portable items, if you plan to use them a lot. I've already ruined one keyboard on my laptop, and was happy to not pay $300 (or so) to have it fixed. Same thing with my phone. My Motorola V-BOX POS finally busted a few months ago and they were happy to replace it with a Nokia 8390. And then the power button on that busted, so I got a third phone (which I had to unlock manually because Rogers are stupid).
:-)
I doubt I'd get coverage like that without a warranty.
Anything else is probably a waste of money. And while they say the warranty doesn't cover abuse, it takes some really obvious abuse (like running over your laptop with a car [happened to me]) before the customer service guys will care. I'll let you guess how my keyboard broke, just like I let them guess.
If you could be told what you can see or read, then it follows that you could be told what to say or think - BoC
Overall, they have to collect more than they pay out. If it was a good deal, they wouldn't be selling it, because they'd lose money. Also, the store has to get a good markup on it or they wouldn't push it so hard, so in addition to being a bad deal at wholesale, at retail it must be even worse. You're looking at like 10% in voluntary fees.
They can be hard to collect on. I've had difficulties getting things repaired. In fact, I was told that I was lucky that the (boss's IBM laptop) machine was still under the manufacturer's warranty, because getting it fixed through that was so much easier. This is straight from the extended warranty department at C_ C_. This brings up the next point.
They usually duplicate manufacturer's warranties. IBM provided a good 1 year warranty. You may be told that they're worth more, but make sure (read it) before you sign anything.
At some shops, you can buy them after the sale for some period of time. They want to sell them that badly. That can't be a good sign. That also means that you don't have to decide while the guy is hovering over you.
One clerk pointed out to me that it's a better deal for things that'll be used in a hostile environment. The $500 camcorder that goes to the beach needs it more than my $80 DVD player. That camcorder was actually a gift, and I'm more likely to provide such a thing as a part of a gift.
They could also be good if you're really risking way more than you can afford to lose. A similar example is automotive liability insurance. If you hurt someone with your car, it seems reasonable to do everything you can to be responsible about it.
Buy reputable products, from reputable vendors. I like what one poster said. "If I need the extended warranty so badly, it must be crap. See ya!"
Know your exposure before you buy an extended warranty.
Assembly is the reverse of disassembly.
So insurance is a gamble, right? You bet some money that you're going to get hurt or your stuff will break or your house will burn down, and if you're right you get a big payout. But in traditional economic terms, the odds are against you, because the insurance company chose your premium specifically for that reason. But it can still be reasonable to buy insurance. Here's why:
It all boils down to the fact that the utility of money is not linear. My (hypothetical) millionth dollar is worth less to me than my hundredth. That hundredth dollar is less important than my last dollar.
So paying $10 to elimiate a 1/1500 risk of losing $10,000 doesn't make sense if you have a million bucks (since you can afford to play the odds and accumulate enough samples to make the expected averages show up), but if you have $8,000 it's a whole nother ball game; one 'loss' and you're fucked. The insurance providers have pockets deep enough to play the odds, and as a result it's profitable for them; if it weren't they would raise the premiums until it was. It's economical for them to cover risks you can't afford precisely because they have a fuckload more money than you do. So when you're talking about losing your last dollar, to them it's just another dollar and paying it out to you doesn't hurt them any more than any other dollar.
So what does this mean? Insurance on small items, that you can afford to replace, such as (hopefully) consumer electronics, is probably not worth it. Situations where 'losing' would constitute a larger percentage of your net worth (cars, homes, personal medical fees, liability for hurting other persons) are where insuarance can be quite reasonable, despite what an erroneously linear risk v. reward calculation might suggest.
Basically when considering insurance ask yourself "what happens if I need the insurance and don't have it?" If the answer is something like "I'm out $250" instead of "I'm fucked" you probably don't need the insurance / extended warranty. If it DOES make sense for you to buy the extended warranty on some consumer electronics, that probably means you're buying something you can't really afford, and you should reconsider the original purchase, not pay extra.
Trees can't go dancing
So do them a big favor
Pretend dancing stinks!
Many credit cards will offer buyer protection for upto 5 years. Check out the details on your card since it may be a better than than the extended Warranties.