Is Buying an Extended Warranty Ever a Good Idea?

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."

Depends on who you get it from

[Voyager529]

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:No.

[green1]

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:Warranty or insurance?

[stephanruby]

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.

Re:Warranty or insurance?

[PRMan]

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?

[FatdogHaiku]

I have a buddy who called Sears to look at a noisy refrigerator. As the service tech is evaluating the fridge, he notes there is also a Sears (Kenmore) washer and drier. When he comments on this my buddy tells him that they also have a Sears TV. The tech estimates about $700 to replace the compressor in the fridge (yes it was a nice, big unit). and my buddy tells them to order the part. Next day my buddy gets a call from Sears wanting to know if he would like a warranty plan for all his Sears stuff. He tells them to let him talk to his wife and would they please call back in an hour. He then gets the service tech on the phone and asks him to stop the order on the repair of the fridge, as the noise has stopped. When the warranty sales person calls back he asks if the plan is effective immediately and is told yes. He gets warranties on everything, giving serial numbers and what not. Two days later he calls to say the fridge is making funny noises. The same tech comes out and starts the part order under warranty. My buddy asks if he can also look at the TV, which "suddenly stopped working", not mentioning it "suddenly stopped" a month ago... during lightning that killed a surge protector and a DirectTV box.

The fridge was the fixed the next week. The TV was determined to be a total loss after having it in the shop for a month (not big TV people here) and a credit for $500 was issued for a new Sears TV. My buddy was out less than $300.

Sometimes the extended warranty sales scam backfires.

Re:Warranty or insurance?

[Lloyd_Bryant]

It absolutely might. My wife being a realtor, we've had home warranties over the years and they almost always pay off

If that were true. the companies selling those home warranties would be bankrupt. It is mathematically impossible for almost all customers to get more money out of their home warranties than they put.

Not entirely true. You aren't factoring in the negotiating power that those insurance companies have with the contractors providing the service. While you may pay $500 for a given repair, the insurance company may, through a negotiated discount, be only paying $300. So there exists a range where both you *and* the insurance company benefit from the deal.

The *contractor* for the work may be one who is losing out, though not necessarily - if the contract allows the contractor to fill 75% of his available time with paying work instead of 50%, the lower rate may still result in a net gain for him.