Not surprisingly, I'm on the road quite a bit and for fun, often stop
and browse the electronics stores when I need to kill a few minutes.
(That's what geeks do.) I'm not usually shopping, but I tinker around
with stuff, see how items are placed in the store, that kind of thing.
It seems that every time I'm in a store, I hear a salesman trying to
sell an extended warranty to anyone buying a computer, TV, game system,
component, etc. Using words like, "protect," "accident," and "peace of
mind," they get people to cave and buy the warranties. What's another
$25, $50, or $75 dollars?
I always resist the urge to jump in the conversation.
There
are a few exceptions that I'll get into, however, my general guideline
is, "never." Never buy an extended warranty. Warranties make the
companies that sell them a TON of money -- that fact alone implies it's
a waste of money.
Because I'm often a sucker for that "peace of
mind" argument, I made it a personal commitment to do research before
hand (not just on the unit itself, but the warranty and policies), and
go into the store with my mind made up. It's amazing that the
warranties offered by the big box stores and online retailers are often
quite different, with different durations and prices.
So why
shouldn't you buy an extended warranty? Since most warranties cost
between 15% and 25% of the cost of the item, it's really a matter of
mathematics. I saw a $3,000 TV at BestBuy have a $500 extended
warranty. That's a lot of money and a pretty big percentage of the
purchase price. Since electronics should have a warranty of their
own, you're typically covered for about a year on most major
electronics. Most electronics fail either out of the box, or within
the warranty period -- it's a fact. Those that don't will either be
good for the long haul, or at least outlive their extended warranties,
meaning the odds of the electronics failing between the time the
manufacturer's warranty ends and the time the extended warranty ends is
pretty small, and not worth the price.
There's another fact, too: electronics depreciate in value extremely
fast. While you may pay $3,000 for a high end TV today, figure what
the likely cost of that TV will be in three years (here's a tip: less
than $1,000, if you can find it for sale still). Blu-ray players are
now less than $200, but were many hundreds more less than year ago. It's an unfortunate truth that we're a disposable nation -- it's just not worth fixing items anymore, and instead, cheaper to simply buy new ones that likely have more features anyway.
One of the biggest questions to consider for an item is: how expensive and difficult is it to get fixed if you're not covered?
Take gaming consoles like the Xbox 360 and PS3. Out of warranty
repairs may cost between $100 and $150. However, that includes
shipping both ways. Paying, say, $75 for a warranty that you will
likely never need when a lifetime repair costs no more than $150 ...
well, it's easy math.
On the flip side, though, if you have a 60" plasma television and would
need to ship it or transport it somewhere to get fixed -- quite likely,
the repair cost would be huge. DLP or lamp-based sets have warranties
that also cover bulb failures -- and given that a bulb has a 60% chance
of going within the first 3 years of a typical extended warranty, it
may be worth the investment.
So, this is exception #1: when getting a repair is prohibitively
expensive or logistically impossible. You should know what is involved
with getting a repair both in a warranty plan and outside of a
warranty. Call up Samsung, Toshiba, or Mitsubishi and ask how repairs
work.
Exception #2 is for mission-critical systems. If you need your laptop
for professional reasons and travel frequently, you should invest in a
warranty plan through the manufacturer. This is more of an insurance
policy rather than a warranty -- you want to make sure you can get your
system up and running in no-time. If you do not need your laptop for
professional reasons, I would avoid warranties as earmarking the money
for a future upgrade will go a lot further.
Finally, you should shop around for warranties and look for bonus
warranties. Many credit card companies provide extended warranties
automatically. Check ahead of time and know if yours does -- many (if
not all) Visa cards will extend the manufacturer's warranty by up to
year.
Although I'm not overly familiar with warranties for cars or homes, my opinion is the same. When my wife and I bought our current home, the sellers provided a 1 year 2-10 Home Warranty. It did save us with an air conditioning problem. But dealing with the company, paying the deductibles on multiple occasions, and then -- when they ultimately replaced a component of the AC -- it didn't cover everything like refrigerant. It was far from convenient. Given that they wanted over $500 for another year of coverage, it was easy to pass. Warranty horror stories are pretty easy to come by on the net.
Regardless of whether you choose to purchase a warranty or not, I urge folks to make the decision based on logical or business reasons, not an emotional one when under the gun of a high-pressure sales tactic.
Have a warranty horror or success story? Let me know...
