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Is Buying an Extended Warranty Ever a Good Idea?
waderoush writes "Consumer Reports calls extended warranties 'money down the drain,' and as a tech journalist and owner of myriad gadgets — none of which have ever conked out or cracked up during the original warranty period — that was always my attitude too. But when I met recently with Steve Abernethy, CEO of San Francisco-based warranty provider SquareTrade, I tried to keep an open mind, and I came away thinking that the industry might be changing. In a nutshell, Abernethy says he's aware of the extended-warranty industry's dreadful reputation, but he says SquareTrade is working to salvage it through a combination of lower prices, broader coverage, and better service. On top of that, he made some persuasive points – which don't seem to figure into Consumer Reports' argument – about the way the 'risk vs. severity' math has changed since the beginning of the smartphone and tablet era. One-third of smartphone owners will lose their devices to drops or spills within the first three years of purchase, the company's data shows. If you belong to certain categories — like people in big households, or motorcycle owners, or homeowners with hardwood floors — your risk is even higher. So, in the end, the decision about buying an extended warranty boils down to whether you think you can defy the odds, and whether you can afford to buy a new device at full price if you're one of the unlucky ones."
Typical lifespan of average laptop pc is 3-5 years. Typical extended warranty lasts beyond usable lifespan. Parts become hard to replace because manufacturers are already building the new stuff and scrapping the old.
This is a problematic piece because it confuses an extended warranty and accident protection/insurance. Most extended warranties do not include accident protection, and that option tends to cost extra and require the base extended warranty, which is the problematic part. If FourSquare wants to offer cheaper, better extended warranties paired with accident protection, more power to them, but that's a very different thing than an extended warranty alone.
It depends- for example, my wife bought me a Nook Color a couple years ago from Staples, and bought the protection plan. About 3 months ago, it wouldn't start. I called Staples and within 2 hours my wife had an email from Staples with a electronic gift certificate for the original purchase price. I replaced my Nook Color running CM10 with a Google Nexus. I bought another protection plan for the Nexus based on that experience.
There are other products I don't purchase them for (such as video games or toys for my kids), because the failure rate is very low, and I'm not into throwing away money.
I don't have hardwood floors. I have tile. I'm safe.
It sounds like the summary is mixing and matching two different things, which are insurance and warranty. Generally warranties don't cover "drops or spills". Insurance is usually better, because once you're done with the device, you stop paying the insurance on it. With extended warranty, you have to pay up-front for the service, with the obvious assumption that you're going to own and use the device (and not lose it, upgrade to something else, sell it, give it away, or have it stolen) for at least a certain amount of time to make it pay off.
Better known as 318230.
No.
some places (memory express in canada) offer a "replacement plan"
this differs from a warranty because instead of mailing something away and waiting for a repair, they will confirm the issue and give you a BRAND NEW PRODUCT with no more than a 5 business day turn around time and that is a worst case scenario. a lot of times they can confirm the defect while you wait and you walk out with the brand new - not use, not refurbished - AND THE NEW REPLACEMENT IS COVERED UNDER THE REMAINDER OF THE ORIGINAL PLAN.
seriously an awesome plan.
even covers single dead pixels on monitors or laptops.
When they sell you an extended warranty, they're doing it to make money. They have a much broader base to analyze, and they're very good at calculating how much to charge vs. how much they'll have to pay out, to end up with a profit.
It's the same with all insurance. However, unlike life, or health, or car insurance, where there's a low, but finite risk of being out a huge amount without insurance, with product warranties you're out no more that what you've already paid.
So, long term, no, they're not a good deal. Put the same money in the bank and you'll be ahead on average. Sure, there's risk you can still end up worse off, but not catastrophically.
"National Security is the chief cause of national insecurity." - Celine's First Law
If that many people break their devices, then the insurance premiums must be commensurately high, or they will not pay out. There's no way around that. An insurance salesman telling you that lots of accidents happen but that premiums are low is lying about something.
For all intensive purposes, "whom" is no longer a word. That begs the question, "who cares"?
I just see it as a sign for a lasting product. The seller believes in the reliability of the product, so he offers an extended warranty. So I prefer to buy things where the warranty is offered, but I don't take the warranty.
Just bought a new car (Honda: generally one of the most reliable brands) and the finance guy spent 10 minutes giving me "worst case scenarios" of how my vehicle could have all sorts of things go wrong and I'd be out thousands of dollars UNLESS I bought the extended warranty coverage.
I said "No, thanks" and I'm going to put $1,000 into a bank account to cover the "what ifs"
If you can afford to replace the device being covered, than they don't make sense. If you can't afford to replace the device, then it may be worth it, because even if it's a losing money proposition on average, it's worth it for the security of not having an unlikely event wipe you out.
That is, I don't have an extended warranty for my computer, because if it dies unexpectedly I can afford to get a new one right away. I do have an extended warranty for my car because if the engine dies unexpectedly that would be a huge financial problem for me.
Try to do a claim on a warranty - always hoops. My truck has 9 months of warranty left, brought in today. I do all my oil changes religiously. Wanting to see receipts for past 6 oil changes. Naturally I have to generate some. Meanwhile they won't work on it until I produce this info.
I worked with a guy whose sister and brother-in-law worked for Mastercare (the warranty arm of Dixons (a "tech" shop like Best Buy)). They only extended warranties that they or anyone they worked with took were for washing machines. They said everything else wasn't worth it.
An extended warranty is a form of insurance, so yes, risk assessment is the surest way to determine if it's worth the investment. One of the ways the industry has gained a bad reputation is by pushing the warranties on people who are low risk... but like other forms of insurance this is how the industry is profitable. If only people who destroy their devices in the first few years buy extended warranties there will soon be no more extended warranties, because how can the companies turn a profit?
I've used my extended warranty on every laptop I've ever owned, starting with an IBM X20. I carry them everywhere, and tend to use any given one for 6-7 years, although I'll usually upgrade every 3 or so (I usually have 2 in service). IBM, Toshiba, and HP have all been good about covering just about anything under warranty, including some accidental damage. Only company that's ever given me any grief was Asus, and that's been on a fairly recent laptop.
I've only ever broken 1 phone, a 2.5 year old HTC Incredible, but there is such a saturation of inexpensive used smartphones on the market right now that I wouldn't worry about that (someone gave me a first-gen RAZR for free anyway).
The couple times i ever fell for that bullshit. And needed to use it...
I was SHIT OUT OF LUCK. Giant waste of time and money.
Either stand behind your product or dont. But don't pretend you will if people just spend a little more. It's a scam.
The question is unanswerable without knowing the cost, and the terms, and what it covers.
A local electronics store has an extended warranty program where you pay X$ for the extended warranty, and if you don't use it, when the warranty is finished, you get a gift certificate for X$ to use, on any purchase over 2 x X$.
So in 2005 I bought a $5000 DLP TV, and paid ~$500 for 5 year extended warranty, which I didn't end up using. In 2010 I bought a new LED backlit LCD for $2200, and used the $500 gift certificate.
Admittedly there is a bit a claim process to go through (much like MIR processes -- fill out an online form, warranty plan number, name, address, etc..), and you only have 6 months or a year or something -- it wasn't unreasonably sort, but there was a limit, after the extended warranty expires in which to make the claim,.
I felt it was really a tremendous value.
I gave the old TV to my parents and it lasted another 3 years before the color wheel motor finally died.
I am an utter klutz, and I'm not lucky. I have shattered my 42 inch TV, an iPad2, and I'm on my second warranty services for my Asus laptop motherboard, and on my 5 year old PC I lost the video card and mb fan twice, each. I make out like a bandit versus the warranty company. I do love SquareTrade's customer service. I call them often.
I normally don't get them, unless the product I'm buying can be reasonably expected to last a long time, and the warranty includes some extras.
When I got a Dell U2410 monitor I got the five-year plan on it, because it offers advance exchange, and I expect a monitor to last five years at least. And I got a plan on my fridge, but that plan also includes a free annual maintenance check, and a discount on parts and filters.
If the warranties didn't offer those extras, I probably wouldn't have bothered.
...insurance company states that extended warranties and their corresponding value to consumers are a function of individual risk factors....duhhhhhhhhhh.
Most Visa and American Express cards come with a perk that will extend the original manufacturer's warranty for an additional year simply by purchasing the item with their credit card. The additional year is covered by the credit card company and usually has to be negotiated through them, but buying accidental protection coverage with that credit card extends that coverage for a year too. YMMV, check with your credit card company.
Best Buy and HP are on my I'll-take-my-chances list. When I've bought warranties from either, they've failed to honor them in more cases than not. HP spare parts are also sufficiently plentiful on eBay and I've gotten to the point where it's worth my time to just swap the parts out myself when something goes wrong. Admittedly this is atypical for the average consumer (especially when it comes to iPads and similar), but it's true at least for me.
Cell Phones? Asurion. Always. I've never once had an issue with them; I pay my deductible and I've got a phone on my desk at work the next day, every time. THEY are worth it. Yes I know that this is insurance, not a warranty per say, but ultimately it boils down to semantics insofaras Asurion gets paid monthly through my cell carrier while an extended warranty is a one-time payout.
Origin PC is another company whose warranties are worth it. Perfect support, perfect track record with replacement parts, and they've worked with me every time, without exception. I'll by warranties from them any day.
Tablets? Well, mine is a Toshiba, a company who's also been historically atrocious with warranty related matters in my experience, plus the tablet itself is sluggish and moderate-at-best quality so the device itself doesn't justify it for me personally.
This does raise a tangentially interesting business question though: we all know that businesses make a mint off the warranties and thus push them in order to bump the profit margin on the sale. I get that, and I'm okay with it. The problem then becomes the fact that it gives incentive for device prices to remain artificially high. If the device is higher priced, companies make more money. It justifies warranty purchases (also at higher prices) in many minds due to how expensive the device is. Now in the case of Apple specifically I'll give them a certain level of a pass on this because they are well known for honoring their warranties very consistently. Everyone else...not so much.
Thus, My original premise stands: certain companies make it worth it because there's actual peace-of-mind involved. I don't worry about my laptop breaking; I know Origin has my back without question. I don't worry about my screen cracking, Asurion will see to it that I can make calls tomorrow by noon. My Toshiba tablet? I have peace of mind knowing I'm screwed if the tablet breaks, as opposed to knowing I'm screwed if the tablet breaks AND I have a hundred bucks in Toshiba's hands whose only redeeming factor is having some underpaid foreign support representative informing me I'm screwed and my warranty doesn't cover whatever-happened-to-my-tablet.
I hardly ever purchase the extended warranty, reasons following the caveats :)
If the item is over $100 AND the item is a necessity that frequently breaks (I can't count the number of vacuums I've had to buy over the years that have just flat-out failed) AND the warranty is reasonably priced (I'll pay about 10%...no more than that).
The reasons that I *don't* usually buy the warranty is that I take care of my shit. I've had more smartphones than I can count and have only had 1 single incident that required a replacement (fell out of my pocket into a hot tub...I know, I know). I rarely drop my devices, yet (in the case of the smartphone/computers/etc) I use them constantly...I'm just "careful".
The other reason is that 99% of the time it requires keeping/filing paperwork and THEN having to remember that I actually bought the warranty 8 months later when the vacuum breaks. If I don't remember (likely), it's a waste of money to buy it...and I can recognize my own deficiencies in that area.
Not only that, if what I'm protecting against is shitty engineering I consider those costly lessons in what companies produce reliable devices. If someone offers me an extended warranty "in case of manufacturer defects" I will usually buy something else entirely. AFAIC if they are preempting a problem (or potential problem that they suspect will happen), they shouldn't be charging me so much for what I'm buying.
The people who want to buy extended warranties that cover accidental damage tend to have accidental damage more often than those that don't. We call this moral hazard.
What that means? Being careful with your stuff will pay off disproportionately compared to the cost of this insurance.
Also, given that most residential insurance policies have deductibles of $500 or $1,000, I don't think the loss of a few-hundred-dollar smartphone is exactly a catastrophic loss compared to having someone steal your car or having a kitchen fire.
Check the specific terms, but usually no. IMHO.
The extended warranty company already has your money. They have every incentive not to give any of it back in the form of a repair.
I had this exact issue with an extended warranty on a slightly used car. Something broke, but as part of the chain of breaking parts was a non-covered part, the timing belt (a consumable), everything after that was not covered. The initial break was a covered part, but that did not matter.
Their default answer was deny, deny, deny. Eventually they threw me a bone and paid half.
If you are buying an expensive item from harbor freight, get the extented warrenty.
Breaking your equipment is a normal part of the HF experience.
Decades ago (aka, mid 80s) this unique-to-my-city electronics joint opened up. Best Buy sized long before BB was around. During their grand opening, they had fog machines going,laser light shows, booth babes, the whole 9 yards.
My friend goes in and buys a laserdisc player from them, and buys an extended 3 year warranty as well. The extended warranty however, wasn't through the manufacturer of the LD player, but rather the store itself. Paid a ruddy fortune for the extended warranty as I recall (almost as much ad the LD player itself)
Less than 3 months later, the store was closed.
So rise up, all ye lost ones, as one, we'll claw the clouds.
Here is how I see it. One should never buy an extended warranty on anything unless such items have a reputation for failing. Only once have I owned a computer that has failed and that was a Mac iBook that I carelessly left in the back of a U-Haul truck driven from Los Angeles to Denver in one day at breakneck speed (my brother was driving ;-} ). After that trip, it would run for about a 1/2 hour before heating up and crashing ingloriously. My last CD/MP3 player (yes, I still use those) from Sony lasted ten years before it finally died. The quality of consumer electronics is getting quite good these days. The same can be said about most new vehicles in 2013. They have a reliability and quality that has never existed. I've owned three Ford Ranger pickup trucks. My current one, a 2006 model year, a gasoline engine, has 206k miles on it, runs better now than it did when it was new, and does not burn oil. The only things I've replaced on it have been a starter, an alternator, both headlights, and one tail light. Furthermore, I have never replaced a clutch because I float the gears. I religiously change the oil. My previous one had 240k miles on it before I drove it to Denver to give to my brother who then put another 50k miles on it before blowing out the engine because he didn't change the oil! Now if you were like a friend of mine who bought a 2001 Mercedes-Benz at the time when they were having serious quality and reliability problems, buying an extended warranty would be a smart thing. He did buy one and used it many times during the 88k miles he put on it because of those problems.
My point is if you buy something NEW and take care of it, if it's going to fail it's likely to fail during the factory warranty period because the defect will show up then. Now, if I were to buy a USED car I'd be crazy to not buy the extended warranty, especially if it was once a rental car. I can control how I take care of something like that after I've bought it but I have no control over how it was driven or maintained before that time.
It's really quite a simple choice: Life, Death, or Los Angeles.
you should get an extended warranty if you're too lazy to try and be more careful
with that in mind, i'd like to sell those people a set of indullable steak knives...
If you're bargaining the price of a purchase down, note that the cost of an extended warranty may be negotiable too.
In Australia (Harvey Norman) I was offered a 3 year extended warranty on a laser printer for $50, supposedly reduced from $75. I declined. Some minutes later he offered me the same warranty for $30 and I accepted. The laser snuffed it about 5 months after all warranties expired. :(
With their 5 day guarantee, if they don't have a refurbished item ready to ship back, why would they ever reimburse the original purchase price if their warranties are typically 12-15%? It would be cheaper to just refund the warranty cost.
I browse Slashdot at +3, Funny
It depends on how easy it is to get it fixed. For example, Dell's laptop warranty is awesome. They come out to your house withing like 48 hours and fix it on the spot. That's a lot different from shipping your laptop off somewhere and getting it back in two weeks. On the other hand, I am not willing to buy an extended warranty on most tablets because it is easier to just buy a new one when it breaks. Cell phones are similar. You often pay $50 to get the same kind of phone you had before. But that phone is probably free now (if you extend your contract.)
I've always bought the super-extended warranty-surance when I buy a Dell laptop. I generally buy a rather nice one, and I use it to make money. A day of downtime costs more than the warranty to cover 3 years, and next-day service is very nice. It covers anything I do as long as I can still read the service tag ID on the bottom of the unit. (For good measure, I tape over the service tag with clear tape to make good and sure that it's readable)
I have a similar warranty on my nice smart phone (currently a Razr MAXX HD that I love for having days of battery life) for $3/month, and I've used it.
But I don't have that kind of warranty on my TV.
I have no problem with your religion until you decide it's reason to deprive others of the truth.
Not necessarily. Unlike, say, car insurance? Selling device insurance is predicated on the assumption of more than just percentage, but in timespan.
Consider that you pay something like $10/mo for your $200 smartphone - not even two years in, and the thing is paid for at original price. One year in, and the device is likely amortized down enough to get a replacement phone of the same make/model for what the customer paid into it so far.
I'm sure there are other aspects as well, but that one stood out for me.
Quo usque tandem abutere, Nimbus, patientia nostra?
It is a transfer of risk: You pay a company to assume the risk of a device failing during normal operation. As with any insurance, it is limited in what it covers, and it is more limited than an accidental damage plan.
As to if they are worth it, well it all depends on your situation. Largely it is if you can afford to replace the device in the event it fails. Insurance is rarely "worth it" in the overall sense. I mean obviously insurance companies have to take in more money, on average, they they pay out or they won't exist. So it comes down to the individual loss: You insure things you can't afford to pay for.
So in terms of an extended warranty, well if accidental damage is you concern then you'll need something additional. It would be for a case where you have an expensive device that you really can't afford to replace, and do not wish to do without.
I've always bought the super-extended warranty-surance when I buy a Dell laptop.
I've had to use the extended warranty that I bought on my Dell laptop to fix an unusably loose power jack. But even with the warranty, it was still far less expensive than buying a MacBook Air just for the MagSafe connector.
Two year no-questions-asked replacement guarantee on headphones with a flimsy cord you just know you're going to trip all over constantly and end up ruining the headphones long before the time limit runs up.
I actually think the approach they use at Staples is a good one: They charge for the extended warranty, but if you never use it, they refund 100% of its cost at the end of the covered period. So, the effective cost is the cost of your money over that period, unless you have a mishap, in which case you'll be glad you had the warranty.
Source...
Some companies have margins as high as 92%.
There's always something in the fine print that screws you over.
AND, if they are such a "great" deal, then why is there such a hard sell on these things?
I was at OfficeMax, and the manager of the store was pushing it and get this, he says you MUST have one because all the electronic stuff is junk! *and he pointed to the aisles of printers and scanners, etc ....*
If it's a bleeding edge thing yes I will buy an extended warranty.
For example I bought an extended warranty on my first large screen TV. Good thing I did too becuase the guts failed twice on it and I ended up with 3x the warranty cost being free repairs. Later ones are a lot cheaper and a lot more reliable.
Other stuff not so much. I bought one on a car because of the price - 8 year coverage for $1000 on a $40,000 car. Odds are pretty favorable the this one will pay off.
If that's in the warranty's terms, then perhaps you should keep the receipt whenever you buy the oil to do the changes yourself.
Shills and dimwits, all of you.
Taco couldn't spell but at least he didn't bend over for anyone who asked. He reserved that for ESR, poor fool.
There are parts like hard drives, batteries, and power adapters that die faster than the warranty. My old MacBook Pro killed six hard drives over four years, mostly while AppleCare still applied. I recall my previous MacBook killing numerous drives as well. My almost two year old MacBook Air has killed the cable on 3 power supplies. I've had my top case replaced on all three machines as well.
If you use your equipment heavily, then you should expect that ordinary wear destroys some components before the warranty expires.
The Christian religion has been and still is the principal enemy of moral progress in the world. -- Bertrand Russell
I've had two projectors. The first had $400 replacement lamps, while the second had $300 replacements. That was MSRP, comparison shopping yielded $300 and $250 respectively (knock another $100 off for knock-offs with extremely bad reviews). At the time mackcam offered lamp replacement warranties for $110 that covered two replacements during the first two years. Both times I got two replacements lamps out of the warranty with no hassle at all. Definitely worth the price.
The value of the warranty was so great it was a major reason I bought the second projector when the third lamp wore out. The next two lamps would have cost $700. Instead I bought a $600 projector, a $110 dollar warranty, and got an extra lamp and an upgrade to 720p for $10.
They're not warranties. They don't warrant anything at all. They're just insurance. Once you get that clear, it's a straight choice on the basis of cost vs benefit. A real warranty penalises the manufacturer for shoddy goods or inadequate service by making them make good the deficit. That is not the case here.
As the Uk experience with PPI and extended warranties shows. You cant watch daytime tv in teh UK with out seeing loads of adds for lawyers trying to get people to claim that they where misold extended warranties and PPI insurance .
I always purchase extended warranties for my laptop computers, and almost every time, I've had to use it. In each case, the covered repair would have cost more than the extended warranty did. Laptops use many components that are specific to that model and are costly to replace.
However, I never purchase extended warranties on desktop computers, and rarely on other devices.
make imaginary.friends COUNT=100 VISIBLE=false
Part of Apple's support is you only pay the contract price (or thereabouts) for replacements. They used to give you the first replacement for free, but sadly that policy is gone. Still... About 100X better than any other manufacturer.
How many devices do you have that might be eligible for an extended warranty? Your dishwasher, your refrigerator, your TV, your laptop, your cellphone, etc., etc. If you buy extended warranties (or insurance) for all of these, chances are at least one of them will fail and be repaired or replaced under warranty -- but the real cost computation isn't for that one winner -- it's for ALL of the extended warranties you've bought vs. the ONE (or two or whatever) that actually pay out. Considered in this light, it's extremely unlikely that you'll come out ahead if you buy extended warranties. Most people (or at least most Slashdot and Consumer Reports readers) have enough devices that are eligibile for extended warranties that it's better to just set aside some money for the inevitable repairs and replacements than to fork over the money to a company that's in the business of making money by analyzing risks and taking in more than it pays out.
It depends on a number of factors. First of all, before you go ahead and buy that expensive accidental damage protection from the manufacturer, check with your home or renter's insurance provider to see if they offer floater items. Mine covers theft and accidental damage in *and* outside of the home for much less than it would cost from the manufacturer. As for extended warranties, well that's really a calculation of many variables, but mainly: what's it worth to you? What is the original warranty period? Do you expect to be using it for that long? It is an acceptable amount of money for you to eat if you never end up requiring warranty work during the extended period? Most of these questions you can only answer for yourself.
We made the mistake of buying Electrolux fridge and dishwasher. An extended warranty for the two cost us 300+. However, we have had over 10 visits on the 2 and invoked lemon law on dishwasher. Now we have kitchenaide with no issues. However we have had over 5 visits for fridge with different issues, but they have to be more than 1 month apart. With this next call(yeah we have a call in), we will have to invoke lemon law again. And we will switch to kitchen aide. If u buy some appliance from overseas get extended warranty. Electrolux, frigid are poorly designed, built, and supported. The same is true of IKEA junk And haier. LG and Samsung are not poorly made, but apparently are horrible for repairs. And very expensive. Get extended for any of these. I would also recommend for GE.
I prefer the "u" in honour as it seems to be missing these days.
For about 10 years, I rolled over Circuit City extended warranties on a series of portable audio players. Tape players at first, then CD players. It was pretty much guaranteed that the headphone jack would get loose before the 2 year warranty was up and portable CD players would start skipping. I'd bring the device back to CC and get the choice between a replacement or store credit for the original purchase price. I'd take store credit, pick the latest and greatest portable device (which was usually about the same amount I'd paid for the old and busted model) and add $20 for another 2 year warranty.
Doing the math, I paid a little over $2/month for the initial $150 purchase and bi-annual $20 warranty purchases. I'd say it worked well for me at the time. I know people will say "rabble rabble rabble anecdotal rabble rabble rabble" but that doesn't change the outcome for me. I came out way ahead of paying for a new device every two years.
I bought a Macbook Air just after a refresh a while back. The vendor I usually buy computer/photo/audio equipment from had a closeout special on the previous model. I know, it goes totally against the Apple mindset, but I bought the old one anyway! The computer was brand new (not a refurb), was one option short of the highest build-to-order configuration, and was $600 off. They threw in AppleCare for free, too. (I wouldn't have bought it for $200.)
Now if something would just go wrong with it! I've been rather fortunate there.
My general opinion on extended warranties/protection plans is that they are really asking, "Would you like to pay $XX.XX more for that?"
When you're dead, you don't know you're dead. It only affects the people around you. Same thing when you're stupid.
Insurance/warranties/etc. are designed to make the companies money who provide them, full stop. They can be beneficial if you can't pay for the repair/replacement cost yourself if something goes wrong, but if you can otherwise afford to repair/replace the unit yourself then by all means, don't pay for insurance/warranties.
yes, sometimes
The insurance company arrived at that number as the expectation value of many copies of you with similar odds. For a 1 in 10 accident, they have the money from 7/10 of you to pay for the unlucky 1/10, with the money from 2/10 as profit..
You collect money only from yourself.
The two years just expired. They shipped her a new (maybe refurb?) processor, of a newer model than her old one. It even came with it's own 3 year warranty. So for a couple grand, she basically got 2 years of warranty for her old processor, a newer model processor with 3 years of warranty. Retail cost of newer processor was well over double the cost of the warranty!
Hard to beat that.
Australian consumer law already covers you for any failures (that are not your direct fault) during the "reasonable expected life of the product". And the thing about extended warrenty is that it sets a lower-limit to the reasonable expected life of the product because it is what the manufacturer expects.
So you can pay 100 bucks for an extended warrenty, or you can get it for free, by law.
I was shocked to read this piece and see that some people would use a warranty to cover a situation where someone sits on a tablet or drops it in the toilet. Has such a person really been found? If so, can we please, please, I'm begging you, PLEASE torture that person to death and then put their head on a pike as a lesson to others? PLEASE? Maybe torture their family and pets too, first, while they watch. It is very important that person suffer as much as possible, and then die far before nature would have made them die, and that everyone knows that we subjected him to the most awful experience possible.
Warranty abuse can only make things more expensive for us all. It's theft. From you and me, not the manufacturer. They WILL get the money back, and we're the ones who will pay it.
If bullshit like that were really covered by extended opt-in warranties, though, then the rest of us wouldn't ever have to pay for it. We'd opt out. Then you people who want new iPads when you sit on them, would bear the expense (plus markup) for the others of your kind. I like that.
So please: buy an extended warranty. Keep your BULLSHIT out of our (non-assholes') non-extended warranties.
tldr: Only take out insurance for things where you'd be in a lot of trouble if things went bad. So no, extended warranty and insurance is not worth it unless you are buying something that is extremely expensive compared to your income and which you cannot afford to lose.
In a casino the house always wins on average. Otherwise casinos would not be profitable. Insurance companies are just like casinos, except when you enter a contract with them you are gambling to avoid a loss instead of getting a win. If you "win" and your device breaks, then you made a return on your insurance money. If you "lose" and the device does not break, then you lost the insurance money. Once you see it in these terms you can also see that you can get "lucky" and win but on average you will lose no matter what kind of insurance you are taking out. Either that or the insurance company will be out of business pretty soon.
So is insurance ever a good idea? It can be, even though it will always lose you money on average. For an extreme example, suppose you are rich now but that an accident makes you poor forever due to a loss of $10m. Back when you were rich, an additional $10m on top of what you already had wouldn't have made that much of a difference to you. The more money you have, the less good uses you have for even more money. However, now that you are poor, getting $10m would make a HUGE difference to you. So $10m is worth more to you depending on how much money you have. Let's say that for the poor person, the money is worth 10 times what it is to a rich person. In that case, buying insurance against a $10m loss makes sense even if the insurance on average pays out only $1 for every $5 you pay it. That's because that 1 rich man's dollar is actually worth 10 poor man's dollars, if you think about it in this way.
This only works out because the loss is so large compared to your income that it would make you value money differently to a significant degree. So insure against catastrophic losses that would make you value money significantly differently. Never insure against small loses that would not impact how you value money - that is, insure if the loss would be catastrophic to your economy. If losing your iPhone would greatly impact your economy, probably that means you shouldn't be buying an iPhone in the first place. So don't insure iPhones, Roombas, window glass, shoes, hats, socks, printers, computers or anything close to that price range.
Because they base their judgement on the amount paid out versus the amount paid in. And their figures year ago on auto "extended warranties" was ~30% of what people paid in got returned in the form of expenses to repair, 70% went to selling, overhead, administration, etc.
Why does every clerk selling you something try and sell the warranty/insurance? Because all the management get bonuses, the selling company gets something, the insurer gets something, etc. That money isn't returned to the consumer in benefits.
I'm 70, have made it a habit of insuring to the hilt everything I can't afford to pay for (house, auto, liability, umbrella rider, etc). For all products I decline coverage because I can afford (with some pain) to pay for them. I'm way way ahead.
Extended warranties are like a casino, a very few win, some break even and the average loses big. Except casinos pay out at much higher rates...some more than 95%.
Before you buy, do some research on the latest profit and loss statement from the insurer. Oh, and insurers often do go bust only to reform the next day under a new name, same management.
I am always one to refuse an extended warranty, however recent events have changed my mind on the subject entirely. I am in Canada to cellular contracts are 3 years. 9 months into this contract a dog managed to knock my phone to the concrete and completed destroyed the screen. Device in question was a Samsung Galaxy S2. Having my provider repair the phone would have cost $225 for parts plus $30 for work which is $255. $350 - $500 or so worth of fees to either upgrade or cancel the service I would say the extended warranty I refused in this situation would have been invaluable at only $7 a month which in my case covers accidental damage twice every 2 years. $7 a month for 36 months is $252, almost half what I just paid for a hardware upgrade ($351 early upgrade fee + $100 deposit + $35 activation fee) and about the same as a repair would have cost. I opted to upgrade to a better device because the option was there but had I not had the money to do the early upgrade the cost of my extended warranty over the 3 years would have been the same as repairing the device only was divided up into much more manageable payments. In any case you need to know what it's going to cost to either repair or replace the phone and compare that to the cost of the extended warranty. I now do have the extended warranty on my S3. If the extended warranty does not cover accidental damage I would probably not opt for it as by the time a defect occurs after the OEM warranty a better device is out and probably the more preferred choice over a refurb in any case which would provide a new OEM warranty
It costs from $500 - $700 to replace a "$200" subsidized phone before your contract is up.
the cost for my complete replacement if anything goes wrong including accidents for 3 years was 30 bucks.
About the price of a good case and screen protection.
And I used it.So for a small breakable thing you carry everywhere you go, yes get on if the price is reasonable.
I know a few people who had accidents to their iPad a year or so after ownership. Also, get your iPad at Bestbuy. Say what you want. but their extended warranty is superior to Apple, their return policy is more liberal, and there are more of them. And I get points, AND I have seen the iPad for 50 bucks off at least once a year. On the down side their hair is combed and none of them are hipsters~
Don't get an extended warranty for washer/dryers/ refrigerators. They are built to last for at least 5 year, and you arne't likely to drop one while carrying it down the street. Of course, if the extended warranty comes with a 'free' maintenance check up every year it might be worth it.
I go won for a computer I ought at compUSA in '96 5 years*, 40 bucks, anything goes wrong. 3 years later the monitor started loosing color, I called them up and the sent me a new equivalent monitor that was better in every way. 6 months later the mother board starting getting flaky. They sent be whole new computer, and a top notch one to boot.
So yes, it was worth it.
*I normally don't buy computers, I build them but it was top of the line and really inexpensive. I told the guy I thought it was marked, but he said that was the price. It was like 150 bucks when other similar boxes (CPU Speed/RAM/HD) where 1000.
Between it and the free replacement, I used it for almost 10 years.
The Kruger Dunning explains most post on
Too verbose. FTFY.
A salesman...is lying about something.
From the excellent "Checkout" - this only aired this week. http://youtu.be/NrxxzsaBkC4
Extended warranties were always bad, until I tried one for a new technology, flat screen monitors. I bought a 17" which failed, and when it failed, Best Retailer had no 17" to replace it with, and replaced it with a 19". When that failed, and I went back, they had to replace it with a 23". Now, if I'd put the money in a piggy bank, the money would have gone farther towards buying a 23" than it did in 2006... so some of this is false economy. But the screens also became more dependable and failed less. I also paid for extended warranty on the "second screen", a flat Sony LCD, in 2007. It still works fine.
Gently reply
In Australia we now have laws that make this decision mostly irrelevant. A product must last for a reasonable amount of time, among other things. Apple are not going to argue that it's reasonable to expect that an iphone wouldn't last at least 3 years so taking out any extra warranty is a waste of money. Ditto for any brand name laptop. For phones, the "reasonable amount of time" thing also has a lower limit of the length of the contract, so if your phone breaks while still under contract the retailer must make it good again. This ends the situation where your phone might break after 15 months and you are stuck paying out the remainder of the 2 year contract.
Most of this was already the case but it's now clearly spelled out and easier to argue the point with ignorant retailers
I think it's starting to make a bit of difference to the products shops are willing to sell, on the basis that if they buy some cheap import and the supplier disappears they are stuck with the warranty, but maybe that's my imagination...
After having two TVs fail in three years at ages of 2.5 years and 5 years (I won't mention the brands but they rhyme with Visio and Sharp I ponied up for the extended warranty on the latest replacement. The way they make consumer electronics these days (low reliability and almost unrepairable), I think the math may be likely to work out in my favor.
Well, if you had a partner with 6 more old phones, you could do the "phone passing" pattern!
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The ancient Egyptians show here are using mystical orbs (which were used as telephones back in the day as telephone substitutes,ok, i kid) for juggling. No, really, ancient egyptians juggled: http://en.wikipedia.org/wiki/Juggling#Ancient_to_20th_century according to an inscription at an egyptian cemetery.
In general, warranties (and insurance), are intended to make the supplier money. You are trading equity for lower variance. You can pay X now for and pay X again in the 10% chance it breaks. Which means that 90% of the time you pay X, 10% of the time you pay 2*X, which is statistically 1.1*X. Or you get the extended warranty and pay 1.2*X, 100% of the time. i.e. no variance.
But there is one exception to this: things for which it's easy to forget you have a warranty. There's a lot of people who buy an extended warranty, and then 2.5 years later their device breaks and they don't even remember they had it. Much like rebates, not everyone goes through the process even though it's "free" money. People are lazy, or forgetful. In this case, the warranties may actually be a good deal, because they can price it based on the assumption that only 30% of consumers will use it, even though they'd lose money if 100% of consumers did. In these situations, as long as you don't forget your have, it can actually be profitable for you. Essentially, the company is sharing the profits of the forgetful with you.
At West Marine, where I used to work, I knew that they were a bad value, and advised the customers as such for all products, except stereos. The average life expectancy of most marine stereos is around two years - lots of moving parts, and delicate components in a corrosive environment that is constantly shaken and stirred - I'm surprised that they last as long as they do.
Anyway, I had quite a few of my customers thank me for recommending the Extended Warranty as they came back in around two years after initial purchase.
Whenever I am offered an extended warranty for something, I just note what the warranty costs and deposit that much in an account I have for "replacing stuff that breaks."
I started that back in 1994 when I bought a TV at best buy. I've had to use it a couple of times in nearly 20 years, and otherwise I am waaaaaaaaaaay ahead. It's a nice savings plan heh.
"Is Buying an Extended Warranty Ever a Good Idea?"
It certainly is, if you're using the 'smash it with a hammer after two years and get a new one' upgrade strategy.
I absolutely would not own an iPhone if it were not for having a warranty. And I love Square Trade for warranties. They're affordable and most of the time cover accidents as well as manufacturing defects. They've saved my bacon with my previous phone, my most recent laptop, and a couple of monitors, all of which were either accident (my laptop) or I simply didn't have the money for replacement when they broke.
I work for Best Buy, so I might have a little bias. For things over a few hundred dollars, the Accidental protection is worth the money. Yes, it IS insurance. Many times the customer breaks something and thinks they should get a new one to replace it. If it was a glitch, then yes, they should get a new one, but if the customer is the one that breaks it, they should in no way be entitled to a new one. This is what the "extended warranty" is all about. If you break something, you get a new one, if you don't, then you did lose the money, but you had piece of mind the whole time. The price of electronics these days is very low compared to say a decade ago. They don't make things as good as they used to, because the technology changes so fast they have to get them out just as fast to keep up with demand. Because of the savings you are getting by the product being low cost, you are also going to have a higher chance of breaking it. This goes for pretty much every industry if you think about it. People complain and say we are trying to trick them into paying extra money. This isn't true, we are just trying to save you from having to pay full price again for the same thing. On another similar but different subject is tech support. I get tired of people coming in and trying to have me fix their mistakes for free. We charge for tech support because we give you assistance when you don't understand how to do something. We are on call 24 hours a day. Because we have to pay those people to be on call 24 hours a day, and to answer the same questions (that are easily found on google), we charge money. This isn't a scam. There are people (not on slashdot) that don't know how to fix their computers. If you wanted to pay to learn how to do it yourself, it would cost you a LOT more than the $100 a year to go to classes, and even then it would probably be out of date in a year or two. We charge you that price to be up to date, and to be on call to fix the stupid stuff people do to their computers.
The insurance company wouldn't make money if they didn't already know the odds were stacked in their favor. Learn to save money on your own for accidents. Don't buy things that you can't afford to maintain.
This is the absolute economic truth. No insurance company can stay in business if they pay out more in benefits than they collect in premiums. If there is a one in three chance of a customer breaking their smartphones, you can bet that the premiums will be more than a third of the cost of said phone. Oftentimes a lot more.
That said, there are two reasons that insurance makes sense. The first is when you know something the insurance company doesn't, namely that you are at higher risk than they think you are. The most obvious example of this is when people buy fire insurance before intentionally burning down their house. The second is when you cannot afford the financial shock. For your health or home, this is probably true. Unless you are some form of financial idiot, this should not be true for a $600 phone.
I purchased an extended warranty on some $300 LG LCD monitors from Best Buy once. 2 months before the 5 years was up one of them burnt out and I got it replaced for free, it was awesome...aside from that, never used an extended warranty...ever...
Simple logical proposal:
Insurance is a profit center with administrative costs. The insured, on average, lose.
Now, if you are an above average risk and you can weasel your way into a pool of lower risk insured, then you personally could stand to win. Above average risk includes those who abuse their equipment and then lie about having done so, etc.
If you're not one of those people, consider the fact that you're buying into an insurance pool with people like that in it - potentially a lot of them.
Our experience is that business equipment is used much more heavily than house electronics yet the warranty costs are the same. So the answer is yes for business electronics.
In fact for certain equipment with generous warranties we are pretty sure the manufacturer loses money on us, but subsidizes it from home users who (misguidedly) purchase a warranty.
I bought a SquareTrade plan for about $20 for a $250 smartpen in 2009 on the reasoning that a pen is a fairly fragile device that goes through a lot of abuse.
About four months later, the pen's display broke. SquareTrade asked me to verify the serial number, then gave me $250 as a payout, no questions asked, which I used to buy the pen's replacement.
After that, I've covered my phones, since the coverage is relatively cheap in comparison to the cost of a retail smartphone, and a smartphone also goes through a lot of abuse. I wouldn't bother for a laptop or computer, or for something very inexpensive, but for a very expensive device that is not easily user-serviceable (I have had occasion to change the screen and battery on an iPhone for a friend, and I would not like to do it again), I'm happy to have the coverage given my good past experience and the fact that they offer coverage that covers even your own boneheaded moves (dropped in water, cracked when sat on, etc.)
STOP . AMERICA . NOW
I've got an older Android phone. It's been dropped, kicked, etc. Screen is still fully intact with no scratches and the phone works just fine. No reason to buy extended warranties on it.
It's funny - several years ago when I bought two new laptops I got the standard warranty on mine, and the 2 year on the other. Within six months the motherboard on the second died and they had to warranty replace it.
A lot of the failure in modern electronics is related to el crapo capacitors. For example, I got a refurbed HD set. Year and a half later set won't power on. Power supply - replaced it and all works well again.
If you own something with those, any extended warranty is worth it :(
Where are my mod points when I need them? Go take your Aspergers meds and quit being a douche bag. His point is valid and if all you can do is respond by using a slur then you deserve all the down mods you get. 6 UID users should know better than this.
Consumer Reports bases their opinions on values that don't necessarily align with yours. For example, they regard pet health insurance as being a bad deal. If you're somebody who'll euthanize a pet at the first hint of an expensive medical condition, they're probably right. If you'd give one of your own kidneys to your cat or dog to save his life if the vet told you it was his only hope for survival, they're absolutely wrong. Most people fall somewhere in between. If you pay $50/month for 10 years, and your pet dies from some accident without warning, the insurance company wins. If your 2 year old cat or dog gets cancer, the insurance company loses. If your 15 year old cat or dog develops some chronic illness that can be kept in check for years with aggressive care at the first hint of a flare-up (pancreatitis, asthma, HCM, etc), the insurance company loses *spectacularly* after briefly thinking it won... especially if he or she lives long enough to get cancer. The insurance companies partly keep their losses in check with somewhat high per-incident deductibles. If your kitty is running up $500-900/month medical bills month after month, even 20% deductibles are going to get really painful and weed out all but the most dedicated pet parents.
Ditto, for things like mobile phone insurance. If you're someone who buys dumbphones, or phones that are free/1-cent and would cost $200 or less if you bought them at full price, it's a bad deal. If you just bought a brand new Galaxy S4 with unsubsidized replacement cost of $600 or more & MINIMUM $200-300 charge for a cracked screen repair, you'd have to be positively insane to *not* buy the insurance. The key is knowing when it makes sense to discontinue it. Buy the insurance for the first 12-14 months, then drop it once the cost of buying a used replacement on eBay is less than double the deductible, and you'll come out ahead. Keep paying monthly premiums on a 2-3 year old phone, or spend more on the deductible than a used replacement on eBay would cost, and the insurance company wins. The main way phone insurance companies come out ahead is by customers continuing their policies LONG after the phone has ceased to be expensive enough to justify it. If you were required to insure the phone for 2 full years, phone insurance might be a bad deal. But since you can drop it at any time as of your next bill, it makes sense to get it with almost any new expensive phone & keep it for at least a few months.
Extended warranties are a tough call. 10+ years ago, stuff that didn't die within the first 3 months probably wouldn't spontaneously break on its own during years 3-5 anyway. Now, it's a total crapshoot. The $900 LCD TV you just bought might have a replacement cost of $600 in 3 years, but chances are that its warranty is only good for 1 year... and if the TV breaks out of warranty, you're probably fucked since modern LCD TVs are practically large-scale integrated circuits with almost nothing inside that can be cost-effectively repaired by an independent repairman. And unlike 10+ years ago, things like LCD TVs really DO spontaneously drop dead after 2-4 years for no obvious reason.
For cars, extended warranties are an equal crapshoot. If you keep the car long enough for the warranty to kick in and matter, it's basically a prepaid service plan that you'll probably break even on & avoid getting hit with a $1,000+ repair bill out of the blue long after the original warranty expired... as long as you don't get into a wreck before that point, and have the car totaled. The "car totaled after paying premiums for months or years, but before any expensive repairs" is really how they come out ahead, because almost ANY car that's more than 5 years old is eventually going to need a repair that's expensive enough to break even or come out ahead with the insurance. At the end of the day, enough cars get totaled for the insurance company to come out ahead, even after they've paid to replace the AC compressors, power steering pumps, alternators, and half the automatic trans
Some extended warranties are money down the drain and some not.
Had one on my father's iPad which turned out to be useless. The front screen just fell apart one day (I was there) and made a huge abyss not from any impact (it has a protective casing) but just some type of internal stress. Apple absolutely refused to cover it, even though it's apparent it's not from an impact. Some people are aware that tempered glass products can just absolutely implode one day but manufacturing defects or just stresses - I had a glass sink once explode in my bathroom in the night sounding like a grenade exploded in the distance - except Apple employees. They offered a fix 4x the cost on ifixit. So for iPads/iPhones, Applecare never again, total ripoff. OTOH, I know certain models of Apple notebooks where the logic boards (motherboards) fail quite frequently and it costs half the computer new to replace, at least. (Though I just use a PC notebook, but less worrisome).
I also laughed at people who got extended warranties on early flatscreen thin LCDs (they were still square) since it turned out replacing them with something better years down the road was only marginally more expensive than the extended warranty.
I've read and been told several times to avoid extended warranties and insurance, but I personally have found that they generally pay for themselves on big-ticket items like laptops and smart phones. For those that are accident prone or unlucky with electronics, like me, they are a lifesaver. I replace my laptop every 2-3 years. Parts start to fail after about 1.5 years, but base warranties expire after one year. Purchasing the extended warranty allows me to budget my laptop purchases more carefully and save up for less frequent laptop purchases that are an improvement over my previous laptop, rather than paying to replace my current laptop more frequently. The same goes with cell phone insurance. I carry it around with me everywhere I go and sometimes s**t happens. Extended warranties and accident insurance are two insurance products where the companies don't have the luxury of evaluating the risk of individual policies, but instead issue everybody the same price at point of sale. The prices are set in such a way that most people are basically overpaying by enough not only to make the company a healthy profit but also to offset costs incurred by people like myself.
I bought the extended warranties in three circumstances:
In the '90's and into part of the '00's, my experience with laptops was that every one of them across multiple brands and users failed in some way before an extended warranty's period ended. And that included a startup that grew to as many as 80 people. Yes, the more abusive users had more problems, but even the gentle users did too. And IIRC, even CR recommended them then in this particular case. I had all manner of parts replaced under the warranty during that period, and it paid off. That said, this has become much less true in the last 8 years or so; I don't believe they pay any longer. This was never true for desktops, which have had readily available replacement parts for cheap (so I didn't cover those).
I bought a TV for my ailing mother, wanted a turnkey experience for her if the TV failed, and I wasn't close enough to be able to deal with it if the unit died. The TV didn't fail, but I received the peace of mind I purchased.
The third case was a little different: a home warranty when purchasing a house. It was pretty clear on inspection whether some of the appliances were close to their EOL. And the bonus is that through negotiation, one can often get the seller to pay part or all of the premium. Made money on that one too.
I haven't bought extended warranties on anything else, and it's paid off.
Oh, one special case: I skipped the extended warranty on tires for my car one time, and discovered (very soon after purchase, fortunately) that the installer had drastically over-inflated the tires, which would have, of course, caused accelerated and non-uniform wear. I suspected such nonsense and checked before I'd driven very far, and reduced the pressure to spec. "Coincidence? Perhaps! You be the judge!"
I've said it for decades now. Each and every single piece of insurance or warranty or extended warranty is always worth having. Each one makes sense and each one is beneficial. However, all of them is a dumb move, for everybody.
Look at your entire year. Look at every insurance you have, and every warranty you purchase, and every extended warranty you purchase. There's a great chance that you're spending over $10'000 per year on such things as a household. Think about mortgage insurance, life insurance, disability, health, car, washing machines, computers, televisions, carpets, couch stains, kitchen appliances, toilets, furnaces. Travel insurance. Dental.
Yes if your furnace breaks, you'd rather have the insurance cover it rather than spend what could be $3'000 to repair the furnace. Absolutely. But you've spent $10'000 that year on insurance and warranties. $3'000 is smaller.
Yes, everything can go wrong every time. But do they? Are you really worried that you'll have $10'000 worth of damage each year every year? That's a pretty sucky year! Think about it. My tvision broke, I needed medicine for a month, I couldn't pay my mortgage one month, my dryer broke, my furnace broke, my air conditioner broke, my fridge broke, my computer died, and my toilet cracked. I had two car crashes. My third car was stolen; my watch too. Oh yeah, and I died.
Hey, you can insure every second of your life, and never have any financial risk for anything. But really, I don't think that was ever the plan.
Or you could do a cost benefit study when companies that often do not honor their policies refuse to do a repair. One very large, American motorcycle company is building a reputation for failure to honor warranties for example.
If the seller believes in his product, or if he's forced by law (like in many countries in Europe) they would offer the warranty as a standard. Did you know that in some countries Europe if a car wears significantly faster than should be expected, they have to replace parts and pay labor completely for the entire economic life of the car? That's 10 years and 200000 KMs for a family gasoline car. Warranty against manufacturing defects on consumer electronics is a mandatory 2 years. These laws have resulted in better quality products and manufacturers having to replace a lot of "bad designs" and improve on them. Government regulation isn't always bad. The only negative is that there are no real class action lawsuits possible in Europe, so it often takes a consumer organization to make a manufacturer proactively recall/replace faulty products. Government regulation isn't always bad.
I was promised a flying car. Where is my flying car?
Insurance has a cost. The insurance companies are not charities funded by wealthy benefactors. Only pay the cost if you need the service, i.e. if the item you bought is so valuable that you cannot handle the loss.
For most people, that means insuring against the loss or damage to house/apartment and car plus fire/theft coverage for belongings. Raise the voluntary excess as high as you can afford, but make sure that you can still handle multiple things going wrong at once.
Insuring a phone? If you need it for work and you cannot afford to replace it then go ahead, but hopefully few people are in that situation. It is expensive to be poor.
There is another case where it makes sense to take out insurance: If you think the insurance company got the odds wrong. Insurance companies are very good at avoiding that problem. You can obviously also "influence" the odds a bit, but there is no insurance against jail terms...
Finally! A year of moderation! Ready for 2019?
A warranty is insurance against the replacement cost of a product. Every consumer product has a lifespan, either the time it will take before it fails, or the time it will take until it's no longer of any value to you. You probably won't be using the same computer 10 years from now. Your fridge will probably last 15. Other household appliances, maybe 15-20 years. At some point they're going to break or become obsolete. Researching the products you purchase, either the specific product or the quality control history of the company that produced it should give you an indication of how long the product will last before it needs repairs or replacement, and how much it's going to cost over its lifetime to maintain.
Now, how much does that warranty cost? Chances are good it's going to cost somewhere around 20% of the purchase price of the product. This is only a good deal if the product is EXPECTED to break within the next 5 years. Note that it won't protect against obsolescence, only replacement/repair of the original product. Of course, the next question is, why would you WANT to purchase a product that is expected to fail in less than 5 years? Therefore, if the product doesn't need the warranty, you shouldn't buy the warranty. If it DOES need the warranty, you shouldn't buy the product.
So what happens if that new TV dies 2 years in. You're out the money, right? Well, yes, there is a statistical chance that some consumer products are going to fail before their average expected lifespan. It happens. However, it's a low chance, and if you purchase 20 different products of relatively equal value, 1 of them might die before their time. So purchase 20 gadgets worth $500 each one of which breaks halfway through its lifespan, then out of $10000 worth of purchases, you lose $250. Extended warranties on all of those products would have cost you $2000, and the warranty period is still unlikely to cover the whole expected lifespan of the product. You could just as easily purchase your own "extended warranty" by putting 10% of the value of the product into savings at the time of purchase, and over the lifetime of all of your products you can expect to use maybe half of it.
Warranties start to make sense (maybe) when you're purchasing a single large purchase, with large repair expenses and pseudo warranty savings with other consumer products won't be sufficient to make up for it. Something like a car or purchase of similar magnitude. Again, if you purchase 20 cars at a time (probably only if you're a business), warranties probably no longer make sense as repair costs over ALL of the vehicles is likely to be less than the price of all of the extended warranties.
So, in summary, for something really expensive, yes. For anything reasonably less, no.
-Restil
Play with my webcams and lights here
If you're buying Apple hardware, from my experience over 22 years, it's a good idea. -Every- Apple product I bought had one or more -hardware- fails within two years - usually *after* the warranty expired. And Apple's willingness to "overlook" the identical disasters of hundreds of customers is boundless.
"You must try to forget all you have learned. You must begin to dream." -- Sherwood Anderson
This is one of those things that really requires per-product research to decide. Things, like cost of the product, cost of the warranty, likelihood that the product will actually fail, whether it covers accidental damage affect whether I buy them.
First, some products are more prone to failure than others. An XBOX 360 for instance red rings often. The cost of the extended warranty on those however is ludicrous, $59+ for a $300 product, but they are so prone to failure that I've purchased the extended warranty on them each time I've gotten a new one and all but the unit I have now has failed within 2 years. Something known to be pretty solid however probably doesn't need one. A Wii is like that. The cost of the warranty, the wii itself and the likelihood of failure doesn't warrant purchasing a warranty.
Second, how much usage you put into a product effects whether you should purchase an extended warranty. A vehicle for instance is a good example of this. I put 130 miles per day on my vehicle with my commute to work. In a year and a half, I'm nearing 50k miles, which means that I could have 300k+ miles on this within 6 years. How would it feel to know that while you're still paying on your car, your engine or transmission could potentially die and you'd be out several thousand dollars? For me, having a vehicle with a warranty is almost a necessity. Every car I've had, I've gotten the extended warranty for and every car I've had has had enough problems during the life of the warranty that the warranty's cost was eclipsed by the repair costs. This one probably requires more math than anything since most parts of a vehicle have a mean time between failure that can help you determine if you're putting enough miles on a vehicle to benefit from a warranty.
Lastly, whether the warranty includes accidental damage coverage is a good example. I'm a musician and I've done touring before, so I know what its like to drop or break a guitar. My 8 year old cousin somehow got himself into a locked room in my house and tried to play one of my guitars, resulting it in it falling and snapping the neck at the headstock. It was a Gibson Studio that I'd spent $1600 for and the warranty I got for it was a 3 year warranty with accidental coverage for $179. I took the guitar up to Guitar Center, where I purchased it and (after confirming they couldn't fix this to Gibson's standards) they gave me the cost of the guitar in return on a gift card, which I promptly used to buy a replacement, with one of their regular 15% off coupons and a little haggling allowing me to come away from the store with 250 dollars still left on the card (and having a new warranty).
Inevitably, its all a gamble, but if you're smart about what and where you buy warranties, they can be a life saver. I've certainly made more use of my warranties than not.
For me, some things (like an expensive laptop, a car that I plan on keeping for a while), the value of peace of mind exceeds the price of a warranty. Even if I don't end up "getting my money back", I still realize the value of having the warranty -- it's one less thing to worry about.
That said, dollar-for-dollar I have had great luck with the warranties that I've purchased for my expensive laptops and cars.
"Consumer Reports calls extended warranties 'money down the drain,' and as a tech journalist and owner of myriad gadgets — none of which have ever conked out or cracked up during the original warranty period — that was always my attitude too."
Looks like Consumer Reports and this supposed 'tech journalist' (aka shill) have lost it. Hey guys, ever hear of Hewlett Packard? No? How about Dell? No?
Or maybe you have, but you got a non-consumer version of something they paid your ass to shill.
Speaking as a former repair tech, those extended warranties are a GOOD thing for you, because half the time, you aren't going to get your warranty honored in the first place unless you've paid for it, even if your failed device is still within the original 1 year warranty period. Apple, HP, Dell, and many others are very guilty of this. This is how they get stupid people to keep spending more money, by making the product crappy and by not honoring their legal obligations, in the hopes that the consumer is too stupid and too broke to try finding a lawyer or filing suit.
Still waiting on Serviscope_minor to wake up to fucking reality and realize that Jessica Price isn't going to fuck him.
I'm not going to weigh in on the wisdom of buying a warranty, as a former car salesman I just want to point out a few things:
...even on a 1 year old car (I pay cash of course). Been doing that since 1968, and I'm WAAAY ahead.
If you can afford a gadget, no use buying a warranty. It's not going to prevent something dying.
Earbuds simply dont survive in my pocket for more than 6 months which has meant that I have saved money with the warranty exchanges more than once.
the guy selling the warranty is presumably charging more than his average cost of repairs times the percentage of claims. therefore, your most likely outlay for repairs or replacement must be less than the cost of the warranty. if this is not true, the guy's going to go broke before you can cash in on the warranty, most likely.
the exceptions are:
1) if the guy's cost of repairs is substantially less than what it would cost you, i.e. he has access to a sweatshop or something.
2) the hassle and lost time involved for you is worth the extra $, assuming the warranty provides you with a replacement right away rather than just making you wait for a repair as you would otherwise
3) the costs of the loss would be catastrophic to you, like a hundred thousand dollars, at which point the linear calculation of risk percentage times average cost is no longer valid, and the value of the warranty becomes higher. (the basic rationale behind insurance, which seems to have been forgotten recently)
Fwiw: I've owned 4 Macs since 1998, and all 4 had some kind of costly near-death or blue screen experience. All were outside the 1 yr. warranty, but the last 3 were within the 3-year Applecare extended warranty, which I bought after the first one went south on me in 2000. Have saved several hundred $$ in repairs/parts this way. It's the only thing I buy extended warranties for, but not getting one for anything with a CPU would feel to me like I was going commando in the dead of winter in the North Woods. Ymmv.
I fixed one fan in the machine myself after it went off warranty. It destroyed batteries and external power supplies too, albeit slower. I therefore believe the power system caused the problems. Apple replace many parts but never the internal power supply, probably cost them over $500 plus labor by not fixing it. I donno if they could realistically diagnose the power supply issue though, assuming it had one.
In Apple's defense, I travel lots and commonly got the machine repaired by Apple certified retailers, not Apple themselves. It's entirely possible they occasionally missed warning signs for power system issues that Apple's own diagnostic systems might pick up.
The Christian religion has been and still is the principal enemy of moral progress in the world. -- Bertrand Russell
I tend to do better having a warranty on my laptops from apple. And of the 3 vehicles I've owned all had and extended warranty. And all 3 warranties paid for themselves.
It Depends. Almost every Extended Warranty I've purchased has paid off in spades to the tune of several thousand dollars, but I'm very choosy about when I purchase these extended warranties. sortius_nod is only partially correct. There are two time a product is likely to fail. Early on, often called infant mortality, which is usually covered by regular warranties and as he/she says, later on in life, but some products have a much higher likely hood of failing. Newly released high technology and reconditioned devices, both mechanical and electronic as well as "open box" items. Also more and more original warranties are covering less an less, often under very specific conditions. Really check out the exceptions clause in every warranty. For the first few years I found the ROHS compliant devices to be very troublesome with a number of solder joints failing in TVs and Motherboards. I still do not trust ROHS solder and repair with real 60/40 solder of which I have a lifetime supply. In most cases a couple of pounds will last for many years. Returned tools or yard equipment may have an extraordinary discount and appear to have never been used. I purchased extra coverage on a large trailer type yard vac. This thing was big! It appeared to be unused. They said it was returned because was too big for the guy's yard. I checked the oil which was "full to the line" and clean. I did half the yard and had to add oil. The engine seized the next time I used it. The overnight soak with WD40 loosened it up, but the engine was shot. They sent a mechanic out to check and he replaced the entire engine. I had a large "walk behind rototiller" for several years, Hooked a rogue tree root which demolished the transmission, tore up the blades, and bent the crank. Again they came out and replaced just about everything except the frame and tires. We purchased a new 40" HDTV some years back. they had just been released and we had to wait for them to come in. (40" is now about a 1/4 the price). The original warranty ran out and so did the audio. Service man came out and resoldered a ROHS joint and remarked that doing so had become a major portion of his business. Yes, the one service call was more than the extended contract, but unlike the yard equipment it didn't run into thousands of dollars. I agree they are seldom worth the money and some are filled with more loop holes than a politicians promises, but we are seeing an influx of electronics and other goods with substandard workmanship and not just from China. With the current state of the economy QA seems to be suffering at home and abroad. Companies are not only not hiring, but streamlining operations and cutting out steps they think will still keep their failure rates within acceptable limits (what the customer will put up with and still buy the product). Another thing to consider is, what would the most expensive failure be? Is it cheaper to repair than the cost of the extended warranty? Does the regular warranty cover all failures, or just in limited cases. Is it worth the cost? When it came time to renew the one on the TV I figured if it failed again I'd be farther ahead to just get a new one far cheaper and more advanced than the original. Still, many extended warranties look good on the surface, but are near worthless in the real world. I use them, but only in very limited instances. I hope the reduction in quality I've been seeing does not make them much more worthwhile.
Must be Monday.
When I bought my MacBook, I wish I bought also the Applecare. The Trackpad had to be replaced twice in the first year. The logic board crapped out on me within the second year (not under warranty anymore). I was stupid enough to fork over $500 to have it fixed. When they put the thing back together, they did a sloppy job. The lid does not closed flush with the base, and now a crack has appeared on the top left corner of the base. Not impressed at all. Also a friend of mine has to return twice his iPhone 4S within the year.