I'm writing an article/paper on Extended Warranties... need input!

Hey guys,

I'm going to start writing an article/paper on extended warranties in the next few days and I want to get your input on what you would like to see covered.

I'm going to touch on the major concerns, for sure:

1. Their cost
2. Are they worth it
3. What you really get
4. Is the store telling you everything
5. Why are they suggested in the first place
6. Are any particular companies better than others?
6.1 Are any stores/retailers any better to get them from than others?

Is there anything else you'd like to see?

Oh and PLEASE do the poll

I never buy the extended warranty. First of all, in many countries the default warranty is defined by law, not by the manufacturer and this legal default is different in different countries. While tech products are often "localized", they are usually still produced at the same factories and therefore there is no reason to expect that the same drive/player/card sold in Germany and in the US would be of significantly different quality. Therefore there is no reason to expect that the thing will breakdown right after the original warranty expires.

In fact, at least in my experience, it's more likely for a tech product to breakdown within the first couple of weeks of use than in a year or two when the warranty expires.

Now, as far as warranty is concerned, I believe that your homeowner (or renter) insurance is a much better friend than a warranty. Most warranties I've seen have clauses like "we repair or replace the damaged product at our discretion" and so on, which makes the process rather complicated at best. For insurance you just need to keep your proof of purchase.

Moreover, I've seen numerous complaints on Amazon regarding various warranty/"protection" type policies included with many products. The main problem is, they will make everything possible to reduce the number of your claim, they just do not want to replace a three-year-old product with a brand new one, they think that there is some sort of reduced value for a used product. For me it's nonsense - I don't buy second-hand. That's why I'm in the insurance camp, rather than in the warranty camp.

I'm a TV Technician, and perhaps 85 - 90% of the work I do is extended warranties. First of all, the stores selling the Extended Warranties (EW) make a great profit off of them. Things like EW, Monster cables, and other accessories are where they make their greatest profit margin.

EW companies will do a repair as long as it cost effective for them. If they repair is less then what they can get a replacement TV for, then they will authorize the repair every time. This is actually what the warranty is for mind you, nowhere in the warranty does it usually say if you have a problem, you will get a new TV.

Things like inconvenience, time off work to be home for the appointment, aggravation, or even time out of service, usually don't factor into the equation. Cost of repair is the main factor.

Obviously the warranty companies are gamblers. They are gambling that they will take in more money then they have to pay out. They no doubt have a lot of research involved in setting prices, and the likely probabilities and such of course. They must also be winners, or they wouldn't be in that business.

It seems when the salesmen at the retailers sell the warranties, they make it seem like if anything goes wrong, a technician will fly in on a magic carpet within 20 minutes, and it will all be fixed. But salesmen are salesmen, and they are looking at the profit.

The question of is it worth it is tough. It depends on the item, what it's replacement cost is, and whether you will need a repair at some time during the life of the EW. If you paid $700 for a LCD TV, and it's panel needs replacement, the cost of replacing the panel for the individual will usually exceed the cost of the TV. And while the EW company will often choose to replace the TV for this reason, at least you either get your TV repaired, or a replacement.

If you purchase the warranty, and never use it, but the peace of mind of knowing you were covered was valuable to you, then even that can be considered worthwhile.

When you purchase the EW, you usually will get a little pamphlet with some basic points. But you are signing a multi-page document that spells out all the exclusions and responsibilities. You could ask to see the entire document, but you can imagine the legalese in which they are written.

If you can get a warranty for $150, then even a house call to have it looked at will almost make it worthwhile, and the majority of repairs would exceed even 3 or 4 times that amount. TV's are much cheaper these days, and repairs are expensive.

All in all, I think EW are a good idea for my customers, but I'm sure there are millions of people I never see, who don't ever get to take advantage of them.

A Guy

I bought a new TV from best buy in 2008 at I bought an extended warranty that covered it for five years last year the panel got black streaks in it I call them and the next day we took the old TV in a got a brand-new one for free and at the same time I bought another extended morning for the new TV just in case.
Jerry

I don't normally buy extended warranties since the majority of items I have purchased have lasted past their usefulness.

I did buy a Squaretrade warranty on my Kenwood 10" car subwoofer since subs have been prone to fail on me.
I also purchased a Squaretrade warranty on my refurbed WDTV Live since it only carried a 6 month warranty and the extended warranty was only $8 or so for 2 years.

I have never had to file a claim with Squaretrade so I am not sure how well their service is, but if one of the 2 items above fails, I will find out first hand.

unifex said:

Now, as far as warranty is concerned, I believe that your homeowner (or renter) insurance is a much better friend than a warranty. Most warranties I've seen have clauses like "we repair or replace the damaged product at our discretion" and so on, which makes the process rather complicated at best. For insurance you just need to keep your proof of purchase.

Click to expand...

Isn't there normally a deductible? And the amount of claims you make can cause your insurance premiums to increase, which means you are paying more in the long run.

I've tended to take them out for expensive household electrics, like the washing machine, fridge/freezer, tumble dryer and the TV. It has paid off for me, the warranties are repair or replace and my washing machine is a replace one from warranty, the tumble dryer had complete new drum and motor and the TV has had repairs done.

I buy my electrical things through my mail order catalogue and take the warranty at the same time, they will renew it every year up to the equipment being 8 years old. It has worked out well for me so far although I didn't take it out when I bought my new monitor, it was a one off payment to cover it for 3 years and I thought why, it's already covered by the manufacturer for 3 years so why waste the money.

It's usually electrical items costing a few hundred pounds that I get cover for.

I don't typically buy extended warranties for any of my tech. Reason being, if I bought extended warranties for all of my tech items, I would certainly spend more in warranties than I ever would in actual repairs.

The only time that I get a warranty is for stores like Target that do a no questions asked swap and the cost of the warranty does not exceed 10-15% of the cost of the item

In the past, when I did buy warranties, it always seemed that I fell into some loophole that wasn't covered by the warranty and they weaseled out of it. To me, I would rather keep my money, somehow invest it for 1-3 years and then either pay for a repair or buy a replacement.

Most extended warranties I have been offered were 1/3 or more of the original item's price. To high in my opinion.

1. Their cost

No. After a year you could buy the EXACT SAME item for 50% OR LESS of the price you originally paid for it a year ago plus / or so ago. New trumps revamping old.

2. Are they worth it

Zip. Like insurance. Riddled with clauses, terms, such. Making it hard to get ANYTHING out of the warranty.

3. What you really get

Hells no. They just want to flog you another add-on to boost their flagging sales.

4. Is the store telling you everything

PROFIT

5. Why are they suggested in the first place

Business exists to make a profit. So, no.

6. Are any particular companies better than others?

No.

6.1 Are any stores/retailers any better to get them from than others?

I've never understood why anyone would buy the store warranty for a PC purchase which has full warranty and tech support coverage from the manufacturer for the first year.

The first year is the time to get the box shaken out, replaced if necessary, then shaken out some more until you know you've done all you can to test it out and get a good unit in place by the time the year runs out.

If you're still not sure, buy another year from the manufacturer.

1. Their cost
Some warranties really give no choices for the consumer because some stores out there usually "market" this like "if you get the warranty you won't run into any problems". The regular Joe who doesn't have a clue will surely bite. As for me, most of the warranties out there are too darn expensive.

2. Are they worth it
For me, NO, since I'm a tech head and know pretty much what I'm doing. For the regular Joe, well, he's got this notion that he's paying good money for the extra service.

3. What you really get
I used to work with a major computer company (which I'm not mentioning) and for the regular person, they probably would think that its extra value for them. For me personally, it's just another way to make a quick buck. If that thing breaks, you fall in line with everyone else who has issues with it, warranty or none, you deal with the same problem and its a pain. You'll have to wait for a month or so before they replace the thing.

4. Is the store telling you everything
Nope. They'll tell you all the good bits but won't even bother with the "fine print".

5. Why are they suggested in the first place
For me I think they're suggested to just make the customer know that the company is putting extra value into the product by giving you extended warranty. But, its just another way to get more money from the customer anyways.

6. Are any particular companies better than others?
Nope. They're all the same. Well, not really all of them but most of them.

7. Are any stores/retailers any better to get them from than others?
Nope. Check what I said above on number 6. ^^

This makes for some interesting reading and might help with your assignment (this is UK based so will differ from country to country)

Extended warranties: know your rights

Shops get your rights wrong

Right after I got out of the Navy I temporarily worked selling TVs and Stereos. If we sold the Extended Warranty we received double commission, even if the price of the warranty was far less than the price of the item. My boss told me that the company needed to spend about 17% of the money paid for warranties on actual repairs, with the other 83% being pure profit.

Another thing to take into account is what you're actually getting. If you buy a three-year warranty on an item which comes with a two-year manufacturers warranty you are only getting coverage for one extra year. Some "replacement" Extended Warranties actually pro-rate the benefit, meaning that if it croaks midway through the third year they will refund you 1/6 of what you actually paid for the item.

For example:

$600 TV with a "Three-Year" warranty (which like I said, might only cover the third year, the rest being on the manufacturer), costing an extra $100.

You're thinking, hey - I'm already laying out 600 clams for the set. Why not go another hundred for "three" extra years. The set dies after 2.5 years. They don't make that model any more and it's not worth fixing. They offer you the replacement value, but pro-rated, just like it specified in the contract you signed. Since you've already received 5/6 of the three-year life of the warranty contract they refund you 1/6 of the cost. You get $100 back and still have no TV. They get to draw interest on your $100 for 2.5 years, meaning they still make out OK. They worked the same deal with many other customers who never had a problem - meaning they get to keep all of that money.

As a general rule I don't because I know they are a wrought.

But I did go for an extended on my plasma simply because it was cheaper to play that game.

After 'haggling' with the salesman for half an hour (I make an offer, salesman pretends to go and 'talk to the boss', comes back with a counter-offer blah-blah routine) it simply worked out cheaper to get the extended warranty to unlock the so called 'cost' price of the set.

At least I knew I was getting shafted

Unlike some poor buggers out there who pay the sticker price THEN add the warranty to the sticker price and live in a land of extended warranty fuelled placebo bliss.

Yeah, so basically they ended up throwing in the extended warranty for nothing once you added it all up, right?

Tells you how much it's worth.

I do agree with it maybe being worth getting one for something like a plasma TV, depending on the terms and price of the warranty. On the other hand, if you stuck the money for the warranty in a decent investment account (do those still exist?) you'd be able to pay for repairs or replacement out of pocket down the road and probably still come out ahead.

(Unless you're like me and decided to spend my "savings" on a new home theater audio setup to go along with the TV...)

Dang. I was not expecting this much feedback at once. I really appreciate all of the input!

If you have anything else to say, please, do not hesitate!

If you have any bad experiences with any particular stores or companies (US or otherwise), I'd like to know that, too!

EDIT: 888th post

profdlp said:

Yeah, so basically they ended up throwing in the extended warranty for nothing once you added it all up, right?

Click to expand...

No, they are cutting their profit on the TV in order to sell the warranty. The warranty makes them a higher percentage profit. If you settle on the price for the TV, then when they try to sell you the warranty, you say I already spent as much as I can afford. Miraculously the price on the TV will come down. Perhaps as much as the actual cost of the warranty, if you stick to it. A Guy

A Guy said:

profdlp said:

Yeah, so basically they ended up throwing in the extended warranty for nothing once you added it all up, right?

Click to expand...

No, they are cutting their profit on the TV in order to sell the warranty. The warranty makes them a higher percentage profit. If you settle on the price for the TV, then when they try to sell you the warranty, you say I already spent as much as I can afford. Miraculously the price on the TV will come down. Perhaps as much as the actual cost of the warranty, if you stick to it. A Guy

Click to expand...

It amounts to the same thing:

$800 TV
$150 Warranty - $150 Discount = $0 = Free
=$800

or:

$800 TV - $150 Discount = $650
$150 Warranty
$650 + $150 = $800

If you're getting a TV and a warranty for $800 either way, what's the difference?

The difference for you is the same. But they won't lower the price of the warranty. They will lower the price of the TV to be able to sell the warranty. Selling the warranty is their goal. A Guy

I suspect that getting the $800 out of you is their goal, no matter how the terms of the deal are written.