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Is Buying an Extended Warranty Ever a Good Idea?

Soulskill posted about a year ago | from the planning-to-break-things dept.

Businesses 329

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."

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329 comments

Not if it is for a computer (0)

Anonymous Coward | about a year ago | (#43624435)

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.

Re:Not if it is for a computer (2)

seebs (15766) | about a year ago | (#43624667)

FWIW, I got a ThinkPad in 2001, got the 3-year extended warranty. Two and a half years in, I bought another two year extension. I got some repairs under it. It was pretty cost-effective.

I still have that machine. Heck, I've used it in the last year because I had Windows stuff that needed XP.

Warranty or insurance? (5, Insightful)

fruitbane (454488) | about a year ago | (#43624439)

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.

Re:Warranty or insurance? (1)

msauve (701917) | about a year ago | (#43624699)

It really make no difference as to whether they're worth it. They'll charge more for the additional accident protection to (more than) offset the additional risk.

And probably much more than the real risk, to account for dishonest reprobates (and there are lots of them) who "accidentally drop their phone in the toilet" when they want a new one.

Re:Warranty or insurance? (4, Interesting)

PRMan (959735) | about a year ago | (#43625015)

It absolutely might. My wife being a realtor, we've had home warranties over the years and they almost always pay off. Older homes develop issues and we get more than we pay out over the year. (I assume most people with them forget they have them and call the plumber or electrician or HVAC guy or garage door guy themselves.

Re:Warranty or insurance? (1)

_Ludwig (86077) | about a year ago | (#43624747)

If FourSquare wants to offer cheaper, better extended warranties paired with accident protection

then Foursquare might actually offer something of value.

An extended warranty is a kind of insurance (5, Insightful)

Sycraft-fu (314770) | about a year ago | (#43624769)

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.

hard drives (2)

Weezul (52464) | about a year ago | (#43624843)

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.

Re:Warranty or insurance? (2)

AmiMoJo (196126) | about a year ago | (#43624867)

It makes no difference, buying them from the shop is never ever worth it in either case.

You are always better off having home contents insurance. Remember that you may have to declare expensive items, but it will definitely be a lot cheaper and probably give you better cover. Good policies cover things like phones when outside the home.

Re:Warranty or insurance? (1)

DragonWriter (970822) | about a year ago | (#43624919)

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.

Economically, its the same thing. The only way it can a third-party product warranty can be a good deal for both the firm offering it and the customer is if the warranty-offering firm can get substantial discounts on service/replacement that are not available to the public. Otherwise, its mathematically impossible for it to be both profitable and, on average, a good deal for the consumer, and given that there aren't the catastrophic cost issues with most products that exist with health insurance or automobile liability insurance, the consumer is better off taking the amount the insurance would cost and sticking it in the bank, and paying for service or replacement as needed.

(Also, in addition to the financial savings, the consumer ends up with more flexibility of choice than under a warranty plan this way.)

Re:Warranty or insurance? (5, Interesting)

stephanruby (542433) | about a year ago | (#43624937)

This is a problematic piece because it's form of advertisement thinly veiled as a Slashdot article.

$125 a year (or more if I pay on a monthly basis) to replace my smartphone in case of an accident. Are they kidding me! The last problem I had with my Evo, Sprint replaced the screen free of charge (they didn't even charge me the $40 I had agreed to paid when I dropped it off). Please note, this is not an advertisement for Sprint (even if Sprint's customer service is fine, their 4G coverage is seriously getting degraded in areas where it used to be fine before).

I think everybody would be better off if they just set aside $125 a year in a piggy bank every time they buy a new device (whether it's a smartphone, a laptop, a TV, or whatever). It all adds up. If something ever goes wrong, they can just break the piggy bank. At least, after everything is repaired and the bills are settled, they'll have a few thousand dollars left over that they wouldn't have had otherwise.

It depends (2)

jesseck (942036) | about a year ago | (#43624453)

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.

Re:It depends (-1)

NoNonAlphaCharsHere (2201864) | about a year ago | (#43624479)

Good choice on buying the extended warranty on the Nexus 7. The glass is pretty much known to crack on its own, without any outside stresses.

Re:It depends (1)

Anonymous Coward | about a year ago | (#43624825)

not in my house. I have two, and neither have had a single issue, my anecdotal evidence trumps your "known" cracking 2-0, and for the record i bought mine on pre order when they were announce, the second bought around Thanksgiving last year.

Re:It depends (1)

msauve (701917) | about a year ago | (#43624725)

Anecdotal experience doesn't count. There are many more people who bought Nook Colors a couple of years ago, along with an extended warranty, who have never needed the warranty. Long term, on average, you lose and they make a profit (or go out of business, screwing those left holding worthless extended warranties).

no hardwood here (5, Funny)

Libertarian001 (453712) | about a year ago | (#43624467)

I don't have hardwood floors. I have tile. I'm safe.

Re:no hardwood here (1)

danomac (1032160) | about a year ago | (#43624593)

Same here. I have concrete. Best material to make a man-cave out of.

Everything bounces off of concrete! Best part is you won't ruin the floor!

Re:no hardwood here (5, Funny)

Roger W Moore (538166) | about a year ago | (#43624643)

Interested in an extended warranty on your tiles to cover cracking due to accidentally dropping your smart phone on them?

Warranty vs Insurance (5, Informative)

Dan East (318230) | about a year ago | (#43624473)

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.

Re:Warranty vs Insurance (2)

danomac (1032160) | about a year ago | (#43624653)

I could never figure out why insurance is needed in the first place. I've had mobile phones for 15 years at least, and I can count the number of times I dropped them on one hand. I've never bothered with insurance and never will.

You'd think if people are buying expensive items they'd take better care of them.

You have to be careful with the insurance too, an acquaintance I know of paid for insurance on the phone, but when something actually happened to it the insurer made up all sorts of excuses to not fix or replace it. Protip: make sure you completely understand the exclusions in the insurance! Some of them are so broad that the dang insurance may not be all that useful!

Re:Warranty vs Insurance (1)

Anonymous Coward | about a year ago | (#43624789)

I can count the number of times I dropped them on one hand

But how many times have you dropped them on the other hand?

Re:Warranty vs Insurance (1)

hawguy (1600213) | about a year ago | (#43624995)

I could never figure out why insurance is needed in the first place. I've had mobile phones for 15 years at least, and I can count the number of times I dropped them on one hand. I've never bothered with insurance and never will.

I've dropped my phone a number of times during the past year, since I'm putting it in and out of my pocket a dozen times a day, using it 1 handed in the train, using it outside in the rain to call a cab, using it on the treadmill at the gym, plugging it into my laptop and forgetting it's plugged in when I take the laptop, etc. There are lots of chances to accidentally drop the phone or knock it to the floor.

You'd think if people are buying expensive items they'd take better care of them.

I don't know what you do with your phone, but I actually *use* my phone, why carry a $600 device around with me if I'm afraid to use it. Every time it comes out of my pocket I'm at risk of dropping it. If I take it out of my pocket 10 times a day, and I manage to not drop it 99.9% of the time, I'm still likely to drop it 3 or 4 times over a year.

So far the phone is fine, but I still have insurance on it. I last used the insurance with my original Droid that stopped working when I bumped it on the edge of a table while I was walking - the insurance company overnighted me a new phone.

Buy for stuff that matters (1)

mcrbids (148650) | about a year ago | (#43624729)

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.

Power jack repair (1)

tepples (727027) | about a year ago | (#43624775)

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.

No. (0, Insightful)

Anonymous Coward | about a year ago | (#43624483)

No.

Re:No. (1)

lalena (1221394) | about a year ago | (#43624533)

Best Buy used to have a warranty where the paid you back exactly what you paid for the device. So if your brand new original XBox that you paid $300 +tax for broke after 23 months they would give you $300 +tax and you could turn around and buy a brand new one for $200 +tax - since the price dropped by $100 after 2 years. Warranty return was no questions asked return for any reason and get handed a Best Buy gift card right there. How is this not a good deal?

Re:No. (5, Interesting)

green1 (322787) | about a year ago | (#43624691)

Did you ever take them up on it? because I can tell you from my experiences with future shop (same company as best buy) that their extended warranty wasn't worth the paper it was written on. I had a camera die on me within the extended warranty period. no physical damage at all, not caused by a drop or anything else, it simply decided to throw an error message one day and wouldn't boot. When I took the camera back in to the store they told me they'd have to send it away and would let me know in a couple of weeks if it was eligible for the warranty. A few weeks later I was told my warranty claim had been denied due to "abuse". After escalating it through several levels of management and refusing to leave the store until it was addressed, they agreed to replace the camera, but not with an equivalent model, but only with the cheapest piece of garbage they had on their shelf at the time. In the end I managed to get half the cost of an equivalent camera to the one that had broken under warranty. And they had the audacity to try to sell me another extended warranty on the new camera!

And that was one of my better extended warranty experiences, I had one on a used car that was denied due to "pre-existing conditions" (I thought that's exactly what warranties were supposed to cover!) I never did get anywhere on that one. I tried to take my roofer up on his installation warranty after discovering that he had caused a leak in the roof, only to find out that he was out of business, and his parent company told me the warranty was only with the individual roofer, not the company...

I will NEVER under any circumstances pay an extra cent to buy an extended warranty on any product. They are fraud, plain and simple.

Re:No. (1)

Richy_T (111409) | about a year ago | (#43624707)

When the device is expected to last well beyond the warranty period and you're not the kind of scumbag who breaks things just to take advantage of the warranty.

replacement plan (0)

Anonymous Coward | about a year ago | (#43624485)

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.

Here's the deal... (5, Insightful)

msauve (701917) | about a year ago | (#43624487)

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.

Re:Here's the deal... (5, Insightful)

stanjo74 (922718) | about a year ago | (#43624635)

Exactly this. For non-catastrophic things, be self-insured. If you can afford to pay for a replacement, pay yourself the insurance premium. The insurance company has already done the work for you to analyze the risk and come up with an insurance premium number.

Re:Here's the deal... (1)

EvanED (569694) | about a year ago | (#43624681)

If you can afford to pay for a replacement, pay yourself the insurance premium. The insurance company has already done the work for you to analyze the risk and come up with an insurance premium number.

Hah. That's a neat idea I hadn't thought of.

Re:Here's the deal... (0)

Anonymous Coward | about a year ago | (#43624639)

Exactly. Most places, like Best Buy push those extended policies very hard. Why? Because they're very profitable. Don't bet against the house when it's setting the odds.

Re:Here's the deal... (4, Insightful)

Darinbob (1142669) | about a year ago | (#43624771)

My rule of thumb is that the harder the sales pitch is the more likely it's not a good idea to buy.

Re:Here's the deal... (2)

Bobfrankly1 (1043848) | about a year ago | (#43625033)

My rule of thumb is that the harder the sales pitch is the more likely it's not a good idea to buy.

I used to hold the same view before I put a couple years in at an electronic retail store. Corporate wanted us to push extended warranties, but often we simply offered them when they showed up on the screen, even though selling them would boost our paycheck.

There were just a few products in the store that I actually pushed the warranty on, simply because I knew the store policy would actually be to replace on the spot, or because I knew the product was prone to failure from past returns. In the second instance, the product were uncommon, very difficult to come by, so there weren't any alternatives, even at competitors.

For these products, I viewed the extended warranty as a good plan, so I did made a harder pitch then I normally would, because I knew the chances were high that the customer would end up using the plan, and then coming back to buy something else because they'd realize I was looking out for them. It was really less about the simple sale, and more about not having to deal with angry/upset customers down the line.

The unfortunate part is that for every salesperson out there who is actually trying to look out for the customer (even though it's motivated by self-interest), there's at least ten sales people who either don't know, or do know and don't care. If you find that one that knows what the hell he's talking about and tells it like it is, get his card and name, and stick to him til he moves on to another job (which he will).

Re:Here's the deal... (1)

green1 (322787) | about a year ago | (#43624755)

I agree. However it's actually worse than the picture you paint. because you aren't just analyzing the chance of product failure, you also have to calculate the likelihood of actually being able to claim the warranty. Most vendors are very good at weaseling out of claims! (There's a small scratch on the case from normal wear and tear? no warranty for you! must have been abuse to cause the damage!) (you fixed it yourself 2 years ago for a completely unrelated issues? no warranty for you!) (you didn't follow the super secret maintenance routine nobody told you about? no warranty for you!)

Re:Here's the deal... (1)

SternisheFan (2529412) | about a year ago | (#43624979)

Salespeople push them because they make an instant commission off of them. Radio Shack workers mostly get minimum wage.

Re:Here's the deal... (4, Insightful)

Intropy (2009018) | about a year ago | (#43624773)

The information is asymmetric both ways when accidental damage is covered. They are going to charge enough to make a profit overall. That is true. But if you know you are accident prone, or have kids that break everything, or something to that effect that is covered, and the warranty company does not know that, you can still have an expected positive return.

Re:Here's the deal... (1)

DragonWriter (970822) | about a year ago | (#43624793)

with product warranties you're out no more that what you've already paid.

Its probably better to look at it as being out the lesser of the use value or replacement cost of the product, which, unless it was discontinued with no equivalent substitute or you purchased it on some kind of wild promotional deal, is probably less than "what you've already paid".

Which just makes the case even stronger against them.

Profit margins (1)

Anonymous Coward | about a year ago | (#43624799)

Source... [businessweek.com]

Last year, profits from warranties accounted for all of Circuit City's operating income and almost half of Best Buy's, say analysts. They figure that profit margins on contracts are between 50% and 60%. That's nearly 18 times the margin on the goods themselves. For example, a four-year contract on a $3,000 flat-panel TV costs about $400. Best Buy gives its insurers $160 and keeps $240 for itself.

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 ....*

Re:Here's the deal... (2)

houghi (78078) | about a year ago | (#43624925)

If everybody is honest, it is a good deal. You pay a little, but you get a lot. However many people will try to scam the insurance part. e.g. if they want a new phone or a new tablet, because the old one is a year old, they will suddenly have a broken item.

This then will bring the price up for others, because, as you said, they want to make money. This will then mean that the dishonest person will be more likely to take the deal, because he will come out positive in the end. The higher prices will scare away the honest person. So prices go even higher.

So if you are honest, you will be paying for the dishonest people. A repair company will know if you really drove over your phone or if you smashed it with a hammer and thus broke it yourself. The most fun is if you give them the identical type they had before, because you had overstock.

Even if you have proof that there is fraud from the customer, it is very hard to turn into a case. Cheaper to pay up to the fraudster (and increase the price a bit. Again.)

So instead of giving a small profit to the company for a shared risk, you pay fraudsters + a small profit. This means that is becomes much cheaper to take your own risk and pay full price if things break.

And as for warranty: when Europe went from 1 year to two years, the prices for hardware went up a bit. Not enough to notice, but enough to cover the extra cost AND the loss in extended warranty sales. When memory serves me right it was somewhere between 1 and 2 percent.

Re:Here's the deal... (0)

dgatwood (11270) | about a year ago | (#43625003)

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.

Yes, and no. The cost always more than offsets their additional risk, but that is not the same as your additional risk. If a product dies under warranty, the manufacturer eats two-way shipping plus the cost of their repair parts. If a product dies without an extended warranty, you eat one-way shipping and the manufacturer eats one-way shipping. You pay for the repair parts and labor at a significantly inflated price. Therefore, even when there's a lot of padding built into the cost of a manufacturer extended warranty, it is still often cheaper than having the repair done yourself.

For example, a single logic board or display panel replacement from Apple costs more than AppleCare. On many laptops, I got several times as much out of AppleCare as I paid in, once you add up the numbers. Of course, Apple still made money because refurbished parts don't really cost anywhere near what they charge for them.

The equation changes somewhat when you're talking about product replacement warranties, such as those offered by retailers. The difference between their replacement cost and your replacement cost is much less, so it doesn't take much padding before those become more expensive on average than your replacement cost. Thus, these are basically never worthwhile.

If that many people break their devices... (2)

istartedi (132515) | about a year ago | (#43624489)

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.

Re:If that many people break their devices... (1)

Penguinisto (415985) | about a year ago | (#43624735)

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.

Selling point (1)

Zorpheus (857617) | about a year ago | (#43624501)

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.

Re:Selling point (1)

jedidiah (1196) | about a year ago | (#43624733)

No. The sign of a lasting product is a warranty that completely negates an extended warranty entirely.

Aftermarket warranties are usually scams. Like all forms of insurance, they tend to never cover your set of circumstances or they come with fees.

Modern extended warranties come with all manner of fees. So they're even more of a scam than the used to be.

Re:Selling point (0)

Anonymous Coward | about a year ago | (#43625005)

"Because they know all they sold ya was a guaranteed piece of shit. That's all it is, isn't it? Hey, if you want me to take a dump in a box and mark it guaranteed, I will. I got spare time. But for now, for your customer's sake, for your daughter's sake, ya might wanna think about buying a quality product from me."

Re:Selling point (1)

msauve (701917) | about a year ago | (#43625007)

Such warranties are not usually offered by the manufacturer (except direct sellers). If they believed in their products, they'd just offer a longer standard warranty. How much they believe in their product is related more to how much they charge for the extended warranty, not whether they offer one. Retailers typically push third-party warranties for everything they sell.

Not only tech, but new cars also (1)

Anonymous Coward | about a year ago | (#43624507)

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"

Re:Not only tech, but new cars also (1)

Darktan (817653) | about a year ago | (#43624595)

When buying my last dishwasher, the salesperson gave me the big list of things that can go wrong, was really going for the hard sell on the extended warranty. I put on my best concerned face and replied "Oh gosh! Is it really that likely to break? I certainly don't want to buy such a poorly made appliance."

It's always fun watching them back-pedal like mad.

Re:Not only tech, but new cars also (1)

jedidiah (1196) | about a year ago | (#43624777)

The last time someone tried to do the hard sell with the extended warranty with us, it gave us just enough time to reconsider our purchase. The price of the product with warranty was less than without. It really offended the inner Ferengi. Set off the old "too good to be true alarms". That ultimately caused us to reconsider the sale entirely.

Re:Not only tech, but new cars also (1)

DragonWriter (970822) | about a year ago | (#43624841)

I've actually (at CompUSA, when it was still in business) had salespeople not backpedal, even when I made it clear that I was either buying without the extended warranty or taking my business elsewhere. Hard sells on extended warranties are often due to the salesperson (or their boss) getting an incentive to sell extended warranties (or, worse yet, an incentive based on the percentage of extended warranty eligible sales that include an extended warranty). This may be a firm, direct incentive or an indirect incentive in the form of the statistic being gathered and being used in evaluations, either way it amounts to the same thing -- a microoptimization that motivates behavior which is, in net, bad for the firm (unless they are actually losing money on base unit sales and making it up on extended warranties).

Depends... (1)

Stormy Dragon (800799) | about a year ago | (#43624513)

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.

Re:Depends... (1)

msauve (701917) | about a year ago | (#43624791)

It you can't afford to replace (or fix) the device, you shouldn't be buying it in the first place. It's just like Las Vegas, the odds are never in your favor.

Re:Depends... (1)

Stormy Dragon (800799) | about a year ago | (#43624881)

So you shouldn't by a car unless you have enough cash on hand to not only pay for the car itself, but to buy a replacement if it fails?

Re:Depends... (1)

gl4ss (559668) | about a year ago | (#43625029)

So you shouldn't by a car unless you have enough cash on hand to not only pay for the car itself, but to buy a replacement if it fails?

technically, yeah, unless you're buying the car just as a luxury item and the rules don't count.

if you're relying on having a car then you should buy a cheaper car, so that you can either buy a new one or finance a new one if it breaks(and then you would need to immediately save up again to replace that one). this is why many people buy expensive car insurance that will pay out enough to replace their car.

that's what all the "smart living" books would tell you anyways.

Warranty often a scam (0)

Anonymous Coward | about a year ago | (#43624517)

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.

Re:Warranty often a scam (1)

PhotoJim (813785) | about a year ago | (#43624693)

If the defect could have been triggered by excessively infrequent oil changes, then the request is relevant. If it isn't (e.g. it's about your brakes or suspension) then it isn't a relevant request.

Keep the receipt when you buy the oil (1)

tepples (727027) | about a year ago | (#43624821)

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.

Re:Warranty often a scam (1)

Ossifer (703813) | about a year ago | (#43624831)

Sometimes I think the fraud in warranties is by the dealer *against the manufacturer* !!!

A few weeks after taking delivery of my Prius, I noted a wind noise at high speed near the right rear passenger door. I guessed it was the rubber seal, and told the dealer, who promptly agreed and replaced it under warranty, no oil change receipts necessary. But the problem wasn't fixed. Then I realized the noise was coming from the fan that cools the hybrid battery--i.e. working properly as designed...

Only for washing machines (2)

yanw (881137) | about a year ago | (#43624525)

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.

Nothing new here... (0)

Anonymous Coward | about a year ago | (#43624537)

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 (0)

Anonymous Coward | about a year ago | (#43624539)

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).

Nope. (0)

Anonymous Coward | about a year ago | (#43624549)

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.

Depends on the cost and terms (2)

vux984 (928602) | about a year ago | (#43624551)

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.

klutzy. (0)

Anonymous Coward | about a year ago | (#43624557)

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.

Re:klutzy. (1)

PhotoJim (813785) | about a year ago | (#43624637)

And people like this are the reason why people like me - who haven't killed a computer or smartphone or TV yet - don't buy coverage. :)

Re:klutzy. (1)

Ossifer (703813) | about a year ago | (#43624955)

I'm not klutzy, but once in Arizona, viewing the Meteor Crater, I had a choice of either dropping my DSLR or my squirming toddler, due to the squirming. I opted for the former, in a split second decision, and the camera fell into the crater. I was able to retrieve it, but it was broken. Instead of buying a new one, I fixed it. Myself. This is Slashdot, not Housewife Consumers' Journal. Some sharp edges I filed down, looks a bit beat up, but I still use it.

Some products are better to repair than to replace, like the monitor I'm using now--7 year old 1600x1200--hard to replace with anything more than 1080 rows (damn you, HDTV!). Started taking 5 minutes of warm up time to be usable. Then I learned the problem was due to old (bulging) capacitors. So $0.50 of capacitors later, and 30 minutes of desoldering/soldering it's good as new...

Not everything broken needs replacing...

I buy them in rare instances. (1)

damnbunni (1215350) | about a year ago | (#43624565)

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.

In Other News today... (1)

VTBlue (600055) | about a year ago | (#43624573)

...insurance company states that extended warranties and their corresponding value to consumers are a function of individual risk factors....duhhhhhhhhhh.

Check With Your Credit Card Company (1)

Z_A_Commando (991404) | about a year ago | (#43624601)

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.

Depends on who you get it from (5, Interesting)

Voyager529 (1363959) | about a year ago | (#43624617)

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.

Re:Depends on who you get it from (1)

pmontra (738736) | about a year ago | (#43624767)

I bought a next business day care pack from HP with my laptop back in 2006 and I used it a few times. It was a good investment and they delivered assistance on time.

Extended Warranty (1)

RoknrolZombie (2504888) | about a year ago | (#43624621)

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.

Moral hazard (2)

PhotoJim (813785) | about a year ago | (#43624625)

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.

Usually, no (1)

YrWrstNtmr (564987) | about a year ago | (#43624631)

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.

Re:Usually, no (2)

_Ludwig (86077) | about a year ago | (#43624839)

Yeah, they were trying to screw you. A timing belt is a "consumable" the same way a clutch plate is a "consumable." Sure, they'll need replacement eventually, but any part not scheduled for replacement within the warranty term should not be exempt from the warranty.

Yes. (0)

Anonymous Coward | about a year ago | (#43624633)

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.

CSB Time (1)

IWantMoreSpamPlease (571972) | about a year ago | (#43624645)

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.

Never on new electronics or vehicles (1)

mendax (114116) | about a year ago | (#43624689)

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.

Re:Never on new electronics or vehicles (0)

Anonymous Coward | about a year ago | (#43624763)

Never is a bit harsh, obviously, as your friend with the Merc would agree.

I did get an extended warranty when I bought my 'vette, simply because if anything remotely major does go wrong it'll easily be waaaaay more than the warranty cost, and it won't take many minor issues to hit that break-even point either. They're actually surprisingly reliable, thankfully. Anyway, on a typical car, no, warranties just don't make sense; if you get one though just go with a $0 deductible. It'll pay for itself the first time you use it, if you use it -- the uplift in price is negligible.

Oh, it does bear pointing out that not all vehicle warranties are created equally, and if you're buying a new car MAKE SURE THEY'RE ISSUING YOU A WARRANTY FROM THE MANUFACTURER. Shadier dealerships will sub a crappier warranty program to boost their profits at your expense.

Re:Never on new electronics or vehicles (1)

Anonymous Coward | about a year ago | (#43625023)

when I bought my 'vette,

You sound old, and bald.

In other words (0)

Anonymous Coward | about a year ago | (#43624701)

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...

Extended warranties price negotiable. (1)

godel_56 (1287256) | about a year ago | (#43624705)

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. :(

Their 5 day guarantee seems dubious (1)

psoriac (81188) | about a year ago | (#43624711)

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.

The company promises to either fix an item and ship it back within five days of receiving it, or reimburse the customer for the itemâ(TM)s purchase price. If one of those two things doesn't happen in five days, SquareTrade refunds the warranty price.

It depends (2)

miroku000 (2791465) | about a year ago | (#43624713)

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.)

It's good for headphones (0)

Anonymous Coward | about a year ago | (#43624781)

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.

Staples (0)

Anonymous Coward | about a year ago | (#43624785)

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.

Depends on Risk (1)

the eric conspiracy (20178) | about a year ago | (#43624811)

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.

Fuck you, slashdot (0)

Anonymous Coward | about a year ago | (#43624829)

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.

Definitely for a projector lamp (1)

Intropy (2009018) | about a year ago | (#43624863)

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.

Insurance (3, Insightful)

frisket (149522) | about a year ago | (#43624901)

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.

Extend warranties are 95% scams (1)

mjwalshe (1680392) | about a year ago | (#43624929)

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 .

Depends upon the device, and the cost. (1)

gstrickler (920733) | about a year ago | (#43624939)

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.

Re:Depends upon the device, and the cost. (1)

wonkey_monkey (2592601) | about a year ago | (#43624987)

I've never bought an extended warranty for anything, and I've never needed one. Anecdote annihilation!

Not always full price (0)

Anonymous Coward | about a year ago | (#43624963)

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.

Do the math (0)

Anonymous Coward | about a year ago | (#43624993)

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.

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