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Warranty Buying ChartExtended warranties are the dirty little secret of the consumer electronics industry. Everyone says they’re a bad deal, and no one wants to admit to purchasing them, but someone is buying them. Electronics stores do make a lot of money on these warranties. People buy them inappropriately, or fail to use them even when they have a valid claim. Still, there are times when an extended warranty can pay off. If you’re considering purchasing an extended warranty, here are a few things to keep in mind:
First, before you buy a warranty, check the instructions on how to use it. The best warranties let you take the equipment back to the store where you bought it (or even better, any store in the chain), and swap for working gear. The next best warranties let you take the gear back to the store for repair. You should be prepared to lose the item for a few weeks, but sometimes they will decide to replace it instead. Things get less convenient when you have to call an 800 number, as this can require shipping your equipment at your expense. The worst are those where the 800 number is run by a third party company. Their profits increase as they provide less service, and so they may make it difficult (long hold times, complex procedures) to exercise your warranty. These warranties may not be worth their cost.
Next, consider warranty overlap. Extended warranty periods are often measured from the day you purchase the item, and run concurrently with the manufacturer’s warranty. If you purchase with a credit card, your credit card company may already double the length of the manufacturer’s warranty, leaving little time for the extended warranty to be the only one in effect. Stores often represent their warranty as “better” than the manufacturer and credit card warranties, but read the fine print carefully, as many of the benefits may not be particularly useful. Most name-brand consumer electronics manufacturers have become better at their own warranty support. So, unless a store offers in-store no-questions-asked replacement, its extended warranty support may be no better than what’s offered by the manufacturer or credit card company.
Think about how rough you will be on the item. When a store offers in-store replacement (or refund) and the item is likely to get a lot of wear, an inexpensive extended warranty can be a good purchase. When my kids were younger, I bought extended warranties on their low-end CD players and joysticks, and benefited from a number of free replacements. Cordless phones are also a likely candidate for a warranty.
Consider how long you will use the item. A friend who runs a small business always buys extended warranties on his business equipment (printers, copiers, etc). He doesn’t get much use out of the first 3-year warranty, but that first warranty is required in order to purchase a second or third 3-year extension, and in those subsequent periods the warranties have saved him from several costly repairs. Warranties on this type of gear also typically offer in-home service, or at least carry-in to a local shop.
Flat panel TVs seem like a likely candidate for an extended warranty. They’re complicated to fix and hard to transport. Nevertheless, recent surveys show that plasma and LCD TVs have proved remarkably reliable in their first few years of operation, and so unless the terms are unusually compelling, an extended warranty may not be a good investment. Even if you have a problem, it’s likely that your manufacturer’s warranty or credit card extension will still be in effect.
- Cordless Phones
- DVRs
- Portable Electronics
- Game Machine (w/ disk drive)
- CD/DVD Carousels
- Printers/Copiers
- Stereo Receivers
- Speakers
- Game Machine (w/o disk drive)
- LCD and Plasma TVs
- CD/DVD Single-Disk Players
- Digital Cameras
My experience at a big box store chain (not difficult to figure out which one, since they used to be famous for this), was one clerk who would not let me complete my purchase for a pair of portable speakers unless I bought an extended warranty. I finally appealed to a store manager to please get this guy off my back. But, lo and behold, the manager started in on me to get the extended warranty. I assumed they had been so successful in the past intimidating their customers, they felt if they badgered me long enough, I would finally give in. In total disgust, I turned on my heels and walked out of the store leaving the speakers and all my other purchases still piled high on their checkout counter. Funny thing, it wasn’t very long after that that this chain ceased hammering its customers over extended warranties. I’d like to think I had a little something to do with that.
Nice overview, but sometimes folks feel they don’t really want the warranty down the road. Some plans can be canceled with a pro-rated refund. This is something to think about if you might be one of these people.
Along that line, make sure an extended warranty can be transferred to a new owner if you plan to sell your electronics or upgrade to a newer technology. Many can for a nominal fee, sometimes no charge.
Having warranty coverage on a used item can certainly make it easier to sell, even for more money.
Also see what the manufacturer offers for an extended warranty before purchasing a 3rd party plan. Not all do, but it’s worth looking into.
Lastly, don’t forget a warranty is only worth the level of service you get from the company if there is a problem.
I buy warranties on almost everything, and have used the extended warranty on almost everything I have bought one for.
I don’t know, maybe it is because I am a clutz, or because I have little kids… but A LOT of the new fangled stuff I buy failed…. here’s the short list
1) Samsung big screen tv
2) Playstation 3
3) Elliptical
4) Dell laptop
5)Universal remote
6) HP printer
Granted, some of these were replaced by the manufacturers original warranty… but I don’t think this article is accurate… Newly made stuff out there is pretty crappy… maybe I do a bad job of maintaining it; but that’s why I buy the warranty in the first place- so I don’t have to be obssessive compulsive about keeping all my gear clean, and not let other people touch it….
I’ve purchased them every so often. Mostly on really new technology or on portable items.
But yeah, it really does feel like gambling, and I do know that most of the time the house is gonna win.
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The Simpsons episode where Moe had to hammer a crayon into Homer’s brain to make him dumb again says it all:
Moe: Alright, tell me when I hit the sweet spot.
Homer: Deeper, you pusillanimous pilsner pusher!
Moe: Alright, alright.
(With a small hammer and chisel, he taps the crayon further up Homer’s nose.)
Homer: De-fense! Woof-woof! De-fense! Woof-woof!
Moe: Eh, that’s pretty dumb. But, uh…
(He taps once more)
Homer: Extended warranty? How can I lose?
Moe: Perfect.
NEVER, NEVER insure against a non-catastrophic loss. That is, Homeowner’s Insurance = good (unless you have enough cash on hand to replace your house without any hardship.)....Towing Insurance on your auto policy = BAD (you can afford a $100 towing bill IF it should ever happen.)
When in doubt, remember the basic economics of insurance - The company selling it is making MUCH more money on premiums than they pay out in claims. If you can afford to assume the risk (i.e. - having your $200 iPod or your $2000 TV fail is a bummer, but you could absorb the loss if you HAD to), then you NEVER need extended warranties.
(BTW the episode was “HOMR” from season 12)