Stay Away from Extended Warranties, says Consumer Reports

[ericl]

Always wondering whether or not you should go for that extended warranty when buying gear at circuit city or best buy?

Consumer Reports (http://www.consumerreports.org/cro/personal-finance/news/november-2006/why-you-dont-need-an-extended-warranty-11-06/overview/extended-warranty-11-06.htm) says no. Their finding is that in most cases, the gear never needs repair in the warranty period, and if it does, the repair will often cost as much as the warranty itself. read article (http://www.consumerreports.org/cro/personal-finance/news/november-2006/why-you-dont-need-an-extended-warranty-11-06/overview/extended-warranty-11-06.htm)

For me, i know that the warranty is pure profit, but it definitely plays on your fears of the big expensive product breaking down, which is a reality. In the last one- two years i've bought two 'big' items from circuit city:

Sony 30" CRT HDTV
i didn't buy the warranty, and the set failed on day 29. Luckily under Circuit City's standard 30 day warranty, they replaced free no problem. I have to give them credit here- i called them the morning after it failed and within four hours they had brought me a new set, set it up, and took the old one away. But if it had happened a day later, I would have been screwed. The new set has been fine for over a year now. Usually it seems like if your set can make it through the first year or two, it will be good for many many more. That's why i am getting my mom a used tv for christmas (not because i'm a cheapskate :smilewinkgrin: )

Toshiba Laptop
I bought it in february, and the monitor just crapped out on me. It seems like it should be an easy fix, but i didn't buy the warranty here either. I'm going to do my best to badger toshiba to take care of it.

So. I've bought two items at CC and they've both failed in one way or another. Is the lesson that the extended warranty is worth the money, or that CC sells junk??

[kexodusc]

Extended warranty is just a form of insurance. And let's be honest, statistically, warranty providers are banking on the products NOT needing service repairs above the cost of the warranty (plus overhead costs, which would be substantial) for them to make a profit. If they are brave enough to bet on Sony and Toshiba, so am I.

That said, you an often negotiate a good price on extended warranty (I got them to throw it on my 51" set), or find a good deal from time to time. And if the added cost alleviates any fears, while providing additional security, it can be money well spent. If I spent $3K on a display, I'd sleep a bit better at night knowing I'll get at least 5 years or whatever out of it.

When it comes to TV's and even computers, I don't know any Tech's anywhere who won't charge at least $70 or so to look at it. I would challenge that the actual billed repair cost is below the extended warranty on many items. Not only that, I hear way too many horror stories about 3 or 4 week stays some items have while waiting for parts from Malaysia or wherever.

I usually rationalize my decison by applying a probability of failure outside of the manufacturer's warranty period ( I often pick 5% for various reasons), and multiply it by the replacement price if the item is low, or a repair price (for cars etc). It's probably not perfect, but it does give me a degree of security and benchmark for gauging whether or not the extended warranty is adding value.

[Groundbeef]

Anything that costs a lot of money for me (anything over about $500) I get the warrenty. I have had several pieces of electronics go bad and the extra insurance is piece of mind.

Also, Santa got the kids DS's for Christmas. I got the warrenty on that because BB will cover accidental damage (dropping, breakage etc) so thats a no brainer.

I got it on the my Laptop because a new screen runs $850 (about 1/2 the price).

I did decline on the $15.00 CD player I got for my daughter. Although at $12.00 it was tempting...

BTW BB is MUCH more competitive on ext warrenties than CC. The Nintendo ds warrenty at BB was $19.99 per console. At CC they wanted $47.00 PER UNIT.

So do your shopping!

[GMichael]

Insurance is a racket. If it wasn't, they'd go out of business.
The 5 year ext warrenty for my Yammie was $25. How could I say no? I don't get the insurance on most electronics because if it's gonna break it usually does so in the first year. I do make some exceptions. $25 for 5 years on a $1000 receiver? The tax was more than that. The lifetime warrenty on our glass top stove even covers us if I drop something heavy on the glass and break it. No other exceptions yet.

[Groundbeef]

Insurance is a racket. If it wasn't, they'd go out of business.


Only if you never need it. I've yet to hear a customer say "ya know, I'd rather pay for that out of pocket. I have insurance but why bother."

That being said, extended warrenties are an EXPENSIVE form of insurance. Case in point, for my video recorder, the rider on my homeowners insurance is only $12.00 a year. But it only covers loss or theft. Not a breakdown.

[emorphien]

I rarely buy extended warranties as well.

Laptops? Sure. Palm PDA, yes and it got me a new one when the battery died (which I haven't used in a couple years, oops). I haven't bought one on anything else.

[Carl Reid]

I only purchase extended warranties on expensive items... I paid about $2k for my tv and got a 5 year in-home repair/replacement extended warranty for $80... So I have relative piece of mind on my purchase... and the warranty was cheap enough that I don't feel ripped off if I never have to use it....

On the other hand I went into CC and they were offerring me an extended warranty on a $20 paper shredder.... which (big shock) I declined....

[SlumpBuster]

CC offered me an extended warranty on a $10 Bob Segar CD for $0.99. No joke.

The problem with the Consumer Reports analysis is one of numbers. They look at a sampling of say a 1000 puchases and only 10 need to use the extended warranty, so they say its not worth it. Well, it was worth it to the 10 with failed products. I'm not buying a 1000 extended warranties, though. If I buy 4 and only use one, I just destroyed the Consumer Report percentage. If I use none, then I am only out the premium paid.

[kexodusc]

Part of the consideration should be the degree of catastrophe you'd suffer if you had to replace the unit yourself. A $200 DVD player, for example, won't be a financial strain to me so I don't bother with the extended warranty. I really take my chances on inexpensive electronics and consider that over the course of my life, the few times I do need to buy a replacement product will still cost me less than the alternative of purchasing extended warranty on all those items. Sort of a self-insured scheme.

But $2000 TV is different. Last thing I want is to choose between absorbing a $2K hit or going without TV. So there's a bit more value in the extended warranty.

I suppose we all consider this with every purchase at some level. Your tolerance for risk affects your perceived value of the extended warranty as well.

[rob7]

$1749.00 tv
Free shipping
$259.00 warranty for 5 years to include in-home service and bulb replacement.
If I never use the warranty, at the end of 5 years, I contact the seller and get 50% of the warranty returned in store credit.

Can't compalin about that.

[Dusty Chalk]

...only 10 need to use the extended warranty, so they say its not worth it. Well, it was worth it to the 10 with failed products...Did you not read the part about the repair costing the same as the warranty? So, no, it was about the same to the 10 who needed it, and money not well spent for the 990 that didn't.

Me, I look at the dependability of the product. If it's crap -- well, that's not fair, because I probably wouldn't buy it.

[bobsticks]

, If they are brave enough to bet on Sony and Toshiba, so am I.
.

Even if I did have an undying trust in Sony, Toshiba, or whomever, I still don't trust the guy that throws the things on the truck to the dock or the crane operator that places them on the boat, or the truck driver on a schedule who drives like a madman through the night to get them to their ultimate destination. Who do you think is unloading them at the retail outlet? My guess would be that it is the same $7.00 an hour kid that tried to sell me the Bose system.
Ponit bein' that there are alot of hands on something between the point of production and your living room; a lot of chances for jostling and damage.

I tend to take Kex's view about cost/utility of insurance. And, even if the repair amounts to the same dollar value as the warranty, I don't have to drive all around God's creation searching for a repair facility--just a return trip to the retailer and "Here, you fix it!"

If it is a TV or computer I'm getting the warranty.

[Groundbeef]

Did you not read the part about the repair costing the same as the warranty? So, no, it was about the same to the 10 who needed it, and money not well spent for the 990 that didn't.

Me, I look at the dependability of the product. If it's crap -- well, that's not fair, because I probably wouldn't buy it.

2 things here. The first point...that is AVERAGE repair cost. For example my extended warrenty on my HP laptop was $299. Now lets say I drop it and break the screen. The screen alone runs $850. Now thats not quite equal. I guess if the "Q" sticks and I need a new letter I am a loser on the deal.

Second point. How are you going to tell if a circuit board is going to go Kaput? Its not like an old car you can tinker with. Even the best made electrical devices can fail. I guess if you buy all of your tech toys 2 years late and have extensive repair histories for each model you are considering. But I would be willing to bet most of us dont have your massive compilation of data.

[Dusty Chalk]

Alright, so of those 10 people I was referring to, it was worth it for 5 of them. The other 5 got overcharged.
But I would be willing to bet most of us dont have your massive compilation of data.That information is freely available on the internet.

[Groundbeef]

Alright, so of those 10 people I was referring to, it was worth it for 5 of them. The other 5 got overcharged.That information is freely available on the internet.

Go back and re-read my post. If you are buying absolute cutting edge, new electronics, there ISN"T going to be data or repair history. It was a bit sarcastic. The point is, with NEW electronics, it is difficult to tell what the future will bring. If you are buying an older TV or computer you may have a better chance of knowing possible problems.

[Dusty Chalk]

Go back and re-read my post. It was a bit sarcastic. Yeah, I figured that -- welcome to my sense of humor.
If you are buying absolute cutting edge, new electronics, there ISN"T going to be data or repair history.You can base it on the manufacturer. It's not completely flying blind. I don't care if it's completely cutting edge, would you buy a Maxtor hard drive without an extended warranty? Heck, I wouldn't buy one period. That's what I meant by freely available information to everybody.

Would you buy an extended warranty for a Plextor? I think it would be unnecessary, given their history, even if it's a completely new product.

That sort of thing.

[Groundbeef]

You can base it on the manufacturer. It's not completely flying blind.


Unfortunatly, it is getting harder and harder to know WHO is making a particular product. Particularly in cutting edge electronics, someone is always either licensing, or producing parts for someone else.

Then there are the Korean brands (nothing against Korea) that seemingly have come out of nowhere. And thats not even getting into private label products that are being made for BB, and others.

[evil__betty]

On any expensive purcahse that I am making where I plan to keep the product for more than one year (time of manufacture warranty), I would buy the warranty. I work in the industry and bought a 3 year warranty on my set because I have had enough people yell at me that their repair is going to cost them almost $1000 and they only purchased their TV 14 months ago. Just a little more peace of mind that I'm not going to be stuck with a dead TV because I can't afford to get it fixed until whenever. I don't trust much of what consumer reports says about any electronic device. Too often they take 10 TVs, give them to 10 different reviews and they get back their opinion on the performance of the sets. I want to see more reivews where product is put side by side with the other product and compare them that way. Even the AV mags rarely do that. I'm sure that some of the ratings would change on some of the sets. One thing that Consumer Reports didn't take into consideration is the fact that where I work (a Canadian electronics chain), if you buy an extended warranty and never need to have the product serviced, we give you a gift card for 100% of what you paid for it at the end of the term. To me, this is a no-brainer.

[sulloj]

Some food for thought about warranties. Why not consider using a credit card that doubles the warranty period for free? I have one such card and use it anytime I purchase an electronic item, be it a tv, stereo or dishwasher. The generic warranty brochure can be had by making a call to your credit card company and all you have to do is keep your receipt. In short the warranty doubles the factory warranty. So look for stuff that has at least a year factory warranty and then of course you'd be covered for another year. Unfortunately some manufacturers like Sony only offer a warranty of 90 days labor and 1 year parts. I've always been a big Sony fan but lately I'm beginning to wonder if all the negative stuff I've read about Sony products is true. Seems they don't trust their own stuff because they only warranty it of 90 days! Something to think about.