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Extended Warranty Purchases Up 10% This Year
Hugh Pickens writes "Consumer Reports says that most of the time, extended service contracts aren't worth the additional dollars. But the Washington Post reports that purchases of extended warranties are up 10 percent over last year, according to the Service Contract Industry Council, a trade group. Consumers 'tend to be more risk-averse and are less willing to absorb the cost of an unexpected product repair or replacement,' says Timothy Meenan, the council's executive director. Mark Kotkin, director of survey research for CR, acknowledges that there are instances when the extended warranty can be worth it. 'We recommend getting one for the Apple computer,' Kotkin says. 'The tech support that comes with the extended warranty is great. Without it, the tech support is skimpy.' Another product where extended warranties may be of use are giant television sets, where few manufacturers will come to your home to make warranty repairs. Extended service contracts for big screen TVs often offer in-home repair, says Meenan, who once shipped a Sony TV to the service center for repair under the manufacturer's warranty. 'They fixed it and brought it back 45 days later.'"
90 percent of extended warranty stuff is pure profit for the manufacturer.
All this means is the consumers are getting stupider.
If I buy a device and it doesn't break, is the extended warranty useless?
I don't think so. The whole point is that _if_ I have a bad device I can get it repaired. Peace of mind has value too.
It's not like my home insurance is useless just because no one has burglarized us and we haven't had any fires...
.: Max Romantschuk
To add to this, this is how whole insurance industry works..
Computers are getting to the point of "good enough" for the current technological cycle. This means people won't be shelling out hundreds of dollars every three years for a new computer when their old computer is good enough and in good shape thanks to an extended warranty.
I've purchased extended warranties on prefab PCs before, from BestBuy, CompUSA, and Frys over the years and sort of felt cheated at the end. Not because the machines didn't break, but because I violated at least 10 stipulations in the warranty contract by year 1. Things like breaking the seal and popping in all kinds of hardware inside of it; replacing original parts with better parts, wiping the HDD (along with backups) and dual booting it, etc.
I could never take the frankenPC to the store and ask for any warranty. The nature of the scam in these retarded contracts is that they require you keep all kinds of things intact, plus have the warranty papers, the original sales receipt, and the same OS it shipped with.
With Apple you have the serial stamped on the hardware and inside the magic ROM thingie. Take it to the store and they'll punch it in and make the necessary repairs. And they try to fuck you over like the BestBuys of the world do, or ask you to "restore from Tiger" when Snow Leopard is the new cool thing.
The problem I have with buying an extended warranty on a mac is that they are already charging a premium for the hardware. If they expect me to pay that then I expect them to deliver a product that is engineered to last. We all know they are using fairly standard pc hardware now though so that expectation is a little unreasonable. I suppose it's for this reason that I have a problem with being expected to pay an additional $200 so my overpriced hardware is covered should something go wrong... or maybe I'm just cheap.
I worked on a data migration project for a major insurance company. As part of that project one of the Business Analysts was asked to give us an over view of the business model represented in the systems we were handling. He started his talk by stating that their most profitable line was the type of insurance which people are asked to take out when they make a purchase. He observed that the customer was rarely able to claim because of the way in which the warranty was worded, and that often the retailer made more money from the warranty than they did from sale of the product. We all laughed. Ha ha.
Since then I have not taken out a warranty of any kind on any product. If it breaks then so what. I have saved more over the years than I might loose from the replacement of repair cost of something breaking.
Consumers 'tend to be more risk-averse and are less willing to absorb the cost of an unexpected product repair or replacement,' says Timothy Meenan, the council's executive director.
Sounds pretty bogus to me. My logic in buying an extended warranty is its an option on low quality. Has the quality of the product dropped enough to now make the warranty a good deal? In the past, sure, it was a ripoff, but now the papers are full of stories about junk from china, inedible food, lead paint on everything, etc. And everyone has the experience of buying something from China-Mart that instantly falls apart or is simply unsuitable for any purpose.
Would I buy an extended warranty on a Milwaukee Tools Inc genuine made in America Sawzall, from perhaps the 1980s? No, that would have been a waste, that saw will run until my great grandkids use it. Note, Milw Tool website declares they're now a "globalized" company so I would assume (perhaps incorrectly) that they only ship Chinese trash now, I'm referring to the products from the good old days. Would I buy an extended warranty on a generic sun-moon-star Inc reciprocating saw from china that doesn't even have instructions in English nor a genuine UL listing? Heck Yeah, that thing probably won't even last thru one complete job!
So the real focus of the story isn't some "adsorbing cost" BS, it is a story about downscaling quality because of lack of spending money. Store brand, or generic, instead of the real deal. And even the real deal is all outsourced to the point of uselessness.
"Science flies us to the moon. Religion flies us into buildings." - Victor Stenger
Exactly.
There are people who can't afford to purchase extended warranties for their devices. Therefore, they deserve to have the extended warranties given to them. To do that we will tax the better extended warranties 40%, and will also penalize people who choose not to purchase them.
All of my major appliances came with my house. The previous owner kept receipts so I know they all between 15 and 20 years old. Except for the dryer, which needed a $60 gearbox a couple years ago, they all work fine every day.
My CRT TV went out a couple weeks ago. I bought it when I was in the USMC so it is ~10 years old. The guy who sold me its replacement insisted I needed his extended warranty. Lots of these TVs break, he said. All made in China. He'd give me the warranty at half price.
To me, that is an insane pitch. I just agreed to give you $1000 for a TV that you now tell me will probably break somewhere between the 1 year warranty that comes with it and the 3 year you are offering. I'm coming off a TV that lasted 10 years. I heard this same pitch while helping a friend buy a laptop at Fry's. Heard someone getting it from a washing machine salesman at Lowe's.
What these people are really selling is fear. And right now people are prone to being afraid, so the pitch works well. Get the idea out there that modern electronics are junk, not just one brand but all of them so there's really nothing you can do about it, then it is easier to sell people warranties they'll probably never need to use.
"Sacrifice for the good of The State" - The State
I bought a $320 printer recently. The seller offered an extended warranty for $80. This warranty covered years 2 and 3; it kicks in only after the manufacturer's warranty expires.
So do the math. 320/80 = 4; the warranty costs me 25% of the replacement cost of the product. Or, I'm betting at 1:4 odds that the machine will become useless sometime between 2 and 3 years old.
Now this is a name-brand product, aimed at office workgroups with a duty cycle of a thousand or or so pages per month. My use will be perhaps a thousand pages a year. The printer sits in a hope office, in an area with few electrical storms, in a controlled environment.
I'm not willing to take a 1:4 bet. At a guess, 75% of the price of the warranty goes to the retailer, with perhaps 25% going to the warranty itself.
I'd take the bet at, say, $20.
I bought an R/C boat for my son at Toys-R-Us; it cost $50 and they offered a full replacement, no questions asked warranty for one year for $3. I bought it. 50/3 = 17; chances are pretty good that my son will trash the boat in one year. (Actually, he didn't; I did. But we got it replaced.)
So it's a question of which side of the bet you are willing to take.
I think that it's not right for one person to have a gold plated plan
"ZOMG COMMUNISM" debate aside, my problem with this specific point is that plans are expensive based on your medical history, not because it's "gold plated" or some BS like that. Someone with a so-called "cadillac" health plan is paying big bucks due to the fact that they have cancer or diabetes or MS or maybe they're just 55 years old and the insurance company is hoping to get rid of them before they have a heart attack or a stroke.
If I have been able to see further than others, it is because I bought a pair of binoculars.
All the executives at my company get a plan that is double mine in cost.
I have no problem with that.
For example, 2 grand annual physicals that check *everything* as opposed to our $300 physicals that test a lot of things.
But you just said they pay more for these plans? They may also drive cars that cost $200'000 as opposed to $30'000. Should we punish them for that too?
However, I share jefferson's view of many mildly wealthy people over the current view of 1% of the population having most of the wealth and a majority of the income.
What's "mildly wealthy"? The number corresponding to that definition has been dropping like a rock, to the point where a family making $200k per year is now "rich". Seriously? It's just greed and envy, and not only have we stigmatized wealth, we've now defined is as "anyone who has more than me". As someone who is intimately familiar with that psychology I can tell you that we're a few inches away from a Bolshevik party.
I think that much concentration is *bad* for our country's political and judicial processes and I'm fine with raising taxes to 50 to 70% on income over a dozen million a year.
As recent legislative efforts have shown, that's not what's happening, and rather taxes are being raised across the board on families earning $150k or more. Considering that the truly wealthy have a ...wealth... of resources that allow them to minimize their tax burden, it is easy to see that this is only going to hurt the middle and upper middle class.
Specifically, our current Democratic administration will continue the efforts of the previous Republican administration in eliminating not just the upper middle class, but the very concept of being able to earn wealth through work... not only through taxation, but also through eliminating the concept of high-paying salaried positions (such as doctors).