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Is Buying an Extended Warranty Ever a Good Idea? 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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Is Buying an Extended Warranty Ever a Good Idea?

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  • by Dan East ( 318230 ) on Friday May 03, 2013 @05:34PM (#43624473) Journal

    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.

  • by sortius_nod ( 1080919 ) on Friday May 03, 2013 @06:45PM (#43625171) Homepage

    The OP has it wrong. Extended warranties last 3 years, during the lowest chance of failure time, electronic devices will generally die in the first few months (manufacturer warranty) or after 3 years (after extended warranty). Add to this that extended warranties have convoluted terms that attempt to stop people getting warranty repairs.

    In Australia, extended warranties are useless due to Australian Consumer Law, which protects consumers by making manufacturers repair goods if they fail before a reasonable time. Essentially, if there's an extended warranty available, the item should last as long a the extended warranty.

  • by EvanED ( 569694 ) <evaned@gmail. c o m> on Friday May 03, 2013 @08:06PM (#43625789)

    The variance is higher, sure, but over time you'll make out (at least if you fit the insurer's risk model well enough). You don't get to average over lots of different people, but you at least get to average over different devices. If this year you buy a laptop and next year you buy a phone and a tablet and the year after you get a Kindle, you'll probably do OK over the life of those four products.

    Insurance is all about expectation vs variance. (Well, and how much you think you line up to the risk model.) You said "the math only works in large enough numbers for the statistics to average out", but that's only true in a sense: larger numbers won't change the expectation, just the variance. For something like health insurance, where if you need $500,000 of surgery there's almost certainly no way you can afford it, the variance wins out and you should get insurance. For something like a $500 phone, for a lot of people probably the expectation wins out.

    The idea which I replied to and thought was clever was not really addressing whether insurance makes sense or not in my mind. It was more like if you already decided that you want to side with the expectation and not buy insurance, you could set aside that dedicated "account" for replacements and the amount to put into it is prefigured.

  • by SteveTheNewbie ( 1171139 ) on Friday May 03, 2013 @08:54PM (#43626029)

    Then lodge a complaint with the ACCC, you may be surprised at the response. (Also helps to send a copy of the complaint to the manufacturer)

    You may also get more joy dealing with your reseller as well - as the sales contract is with them, and they should be the ones making it right, and then it will be up to them to claim back from the manufacturer. [] has more information and is a very easy to read guide [] has contact information and advice on where to file a complaint

    I've found printing out the guide and taking the relevant section in with you when you visit a retailer has worked every time. It got my fridge fixed out of warranty, and my PS3 replaced when the DVD drive died about 2 weeks after the warranty expired.

  • by Seumas ( 6865 ) on Friday May 03, 2013 @10:59PM (#43626747)

    It really depends on the company and the product in question. It'd be pointless to buy an extended warranty on a $130 printer at Staples, but it'd be a very good idea to get the AppleCare for most Apple products, since they are extremely good about dealing with problems (my laptop developed a severe series of blemishes where the coating on the unibody just completely wore away after the initial coverage, but within the Apple Care coverage -- I sent them photos and had me stop in at the nearest Apple Store for a brand new replacement with absolutely no hassle).

    I'd also get an extended warranty for an expensive television. Maybe not the warranty the store is trying to sell you, but you can do your research and find various extended warranty companies (I've found SquareTrade to be fine enough). If you spend $4,000 on a real project display and you can get a three year extended warranty for $200 which includes a free bulb replacement (easily $130+), then that's a pretty good deal.

    Most recently, I bought a $400 XBox 360 that developed an issue with reading discs about 80% of the time and made a concerning grinding noise as it spun the disc, trying to read them. Because Microsoft's warranties are so stupidly fucking short, I had to rely on my SquareTrade warranty (which I think was $30 or so?). I filed a claim online, they sent me a customized box and packing materials just for the console and I had it shipped, fixed, and returned to my home in about ten days. That was well fucking worth the $30.

    I would generally say "extended warranties are a scam", but as with many things, there are exceptions and you have to know when and where those are. A good rule of thumb is probably to just never buy the extended warranty they're pushing on you at the showroom for *anything*. Period. That's just an upsell to pad their pockets and nothing more. Probably also don't bother getting a warranty on fairly cheap things - the exception being something like an XBox 360 which is not *almost* cheap, but also known to have serious failure rates. I saw it as an investment with an absolute eventual return - and it paid off.

Solutions are obvious if one only has the optical power to observe them over the horizon. -- K.A. Arsdall