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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 fruitbane ( 454488 ) on Friday May 03, 2013 @05:31PM (#43624439)

    This is a problematic piece because it confuses an extended warranty and accident protection/insurance. Most extended warranties do not include accident protection, and that option tends to cost extra and require the base extended warranty, which is the problematic part. If FourSquare wants to offer cheaper, better extended warranties paired with accident protection, more power to them, but that's a very different thing than an extended warranty alone.

    • by msauve ( 701917 )
      It really make no difference as to whether they're worth it. They'll charge more for the additional accident protection to (more than) offset the additional risk.

      And probably much more than the real risk, to account for dishonest reprobates (and there are lots of them) who "accidentally drop their phone in the toilet" when they want a new one.
      • by PRMan ( 959735 ) on Friday May 03, 2013 @06:28PM (#43625015)
        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.
        • by Jah-Wren Ryel ( 80510 ) on Friday May 03, 2013 @07:41PM (#43625599)

          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.

          • by Anonymous Coward on Friday May 03, 2013 @07:59PM (#43625741)

            I am not at all surprised by his anecdote and I think it is true. I know many people with home warranties. Most people I know have abysmal stories and treatment. However, the one person I know who gets good treatment is my cousin who is a real estate agent and his family. Perfect illustration, his parents were having a hard time trying to get something covered with the company fighting them all the way, they complain to their son, who calls the company on their behalf and BAM, someone is there the next day fixing it and they waive the fee. That makes full sense too. After all, it is the real estate agent's job to sell those to their clients. Heck, every time my wife and I looked at a home, our agent tried to sell them. They ethically couldn't sell them, unless they actually thought they were in the client's best interests.

          • by Lloyd_Bryant ( 73136 ) on Friday May 03, 2013 @08:44PM (#43625987)

            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.

        • by FatdogHaiku ( 978357 ) on Friday May 03, 2013 @08:11PM (#43625825)
          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: (Score:3, Insightful)

            by davester666 ( 731373 )

            I can't tell, are you happy or angry or sad that your friend blatantly defrauded Sears?

            You don't mind paying a little bit extra for everything at Sears to help him get a new TV and Fridge?

            Or are you more of a "just look out for number one" person [no, I'm not talking about making sure someone isn't pee'ing off the balcony as you walk underneath it]? That it's up to Sears to make sure it's not defrauded, and if you can rip anybody off, you should.

    • If FourSquare wants to offer cheaper, better extended warranties paired with accident protection

      then Foursquare might actually offer something of value.

    • by Sycraft-fu ( 314770 ) on Friday May 03, 2013 @06:01PM (#43624769)

      It is a transfer of risk: You pay a company to assume the risk of a device failing during normal operation. As with any insurance, it is limited in what it covers, and it is more limited than an accidental damage plan.

      As to if they are worth it, well it all depends on your situation. Largely it is if you can afford to replace the device in the event it fails. Insurance is rarely "worth it" in the overall sense. I mean obviously insurance companies have to take in more money, on average, they they pay out or they won't exist. So it comes down to the individual loss: You insure things you can't afford to pay for.

      So in terms of an extended warranty, well if accidental damage is you concern then you'll need something additional. It would be for a case where you have an expensive device that you really can't afford to replace, and do not wish to do without.

      • by PRMan ( 959735 )
        But they can be profitable the same way that "Free after rebate" is profitable. Only 35% of people fill in the rebate card, meaning they are just in essence offering a 35% discount. In the same way, many people don't make claims even if they have an Extended Warranty or Insurance.
      • by Technician ( 215283 ) on Friday May 03, 2013 @07:24PM (#43625473)

        The biggest deal at the moment is the falling prices for older technology.

        Case in point, my 32 inch (yes only 32 inch) flatscreen tv was $800 when I bought it. 6 months later in warranty the sound failed. I took it back to Costco for repair. They didn't repair them, they refund them in the warranty period. Got the refund and picked up another one, same model, on sale for $600. If I would have bought an extended warranty and it failed just outside the manufacture warranty period, I could have gotten a repair on that $600 TV, but now the prices on 32 inch TV's have continued to fall. I took my gamble and didn't buy an extended warranty. If the set dies, a replacement is only slightly more than the extended warranty would have cost.

        In summary. If I don't use the warranty, it costs nothing. If I did buy the warranty, I would have almost paid for a new LED version of my TV with a new warranty for the privilage of having my old CFL tv repaired.

        Frankly I am glad I saved the money. The newer TV's have higher resolution and higher contrast, brighter color, etc than a repaired tv for about the same price would have provided.

        LED 32 inch TV's are about $250 now.

    • There are parts like hard drives, batteries, and power adapters that die faster than the warranty. My old MacBook Pro killed six hard drives over four years, mostly while AppleCare still applied. I recall my previous MacBook killing numerous drives as well. My almost two year old MacBook Air has killed the cable on 3 power supplies. I've had my top case replaced on all three machines as well.

      If you use your equipment heavily, then you should expect that ordinary wear destroys some components before the

    • by AmiMoJo ( 196126 ) *

      It makes no difference, buying them from the shop is never ever worth it in either case.

      You are always better off having home contents insurance. Remember that you may have to declare expensive items, but it will definitely be a lot cheaper and probably give you better cover. Good policies cover things like phones when outside the home.

    • If FourSquare wants to offer cheaper, better extended warranties paired with accident protection, more power to them, but that's a very different thing than an extended warranty alone.

      Economically, its the same thing. The only way it can a third-party product warranty can be a good deal for both the firm offering it and the customer is if the warranty-offering firm can get substantial discounts on service/replacement that are not available to the public. Otherwise, its mathematically impossible for it to b

    • by stephanruby ( 542433 ) on Friday May 03, 2013 @06:17PM (#43624937)

      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: (Score:3, Insightful)

        by Anonymous Coward

        It makes far more sense to put your own money in the bank to insure your items than to pay someone else to do it. Here's why:

        1. You will be earning interest on the money.
        2. You decide whether an item merits repair or replacement.
        3. You still have the money.

        Consider a scenario where your cell screen shatters.

        If you are insuring your own device, you have a choice to repair the item or use it as is (assuming it is otherwise functional). You might elect to save the money and just wait a few months for the next

      • by drcagn ( 715012 )

        I don't think you're looking at the big picture or at least you don't realize how stupid/clumsy most people are. When I worked at Best Buy , we saw people come in all the time--by that, I mean repeat offenders--with water-damaged phones and cracked screens. $15 a month or whatever it is may seem steep, but these people definitely got more than their money's worth out of it. Besides, it's not just about the monetary value, it's also about the peace of mind knowing that you can do pretty much whatever the hel

    • by hjf ( 703092 )

      My dad does repair for warranty, extended warranty, and insurance.
      Extended warranty IS a good deal IF IT'S CHEAP. If you buy a $500 TV and you're offered a 5-year warranty extension for $50 extra, by all means take it, even if it's 3-year extension is still a decent deal. If it's $100 or more... it's not such a good deal anymore. In 3 years your TV can fail. Especially the ultra-flat models with little space for big capacitors (PSUs can die quickly in those conditions). Extended warranty has the SAME CONDIT

  • by jesseck ( 942036 ) on Friday May 03, 2013 @05:32PM (#43624453)

    It depends- for example, my wife bought me a Nook Color a couple years ago from Staples, and bought the protection plan. About 3 months ago, it wouldn't start. I called Staples and within 2 hours my wife had an email from Staples with a electronic gift certificate for the original purchase price. I replaced my Nook Color running CM10 with a Google Nexus. I bought another protection plan for the Nexus based on that experience.

    There are other products I don't purchase them for (such as video games or toys for my kids), because the failure rate is very low, and I'm not into throwing away money.

    • by msauve ( 701917 )
      Anecdotal experience doesn't count. There are many more people who bought Nook Colors a couple of years ago, along with an extended warranty, who have never needed the warranty. Long term, on average, you lose and they make a profit (or go out of business, screwing those left holding worthless extended warranties).
  • by Libertarian001 ( 453712 ) on Friday May 03, 2013 @05:34PM (#43624467)

    I don't have hardwood floors. I have tile. I'm safe.

  • 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.

    • I could never figure out why insurance is needed in the first place. I've had mobile phones for 15 years at least, and I can count the number of times I dropped them on one hand. I've never bothered with insurance and never will.

      You'd think if people are buying expensive items they'd take better care of them.

      You have to be careful with the insurance too, an acquaintance I know of paid for insurance on the phone, but when something actually happened to it the insurer made up all sorts of excuses to not fix o

      • by hawguy ( 1600213 )

        I could never figure out why insurance is needed in the first place. I've had mobile phones for 15 years at least, and I can count the number of times I dropped them on one hand. I've never bothered with insurance and never will.

        I've dropped my phone a number of times during the past year, since I'm putting it in and out of my pocket a dozen times a day, using it 1 handed in the train, using it outside in the rain to call a cab, using it on the treadmill at the gym, plugging it into my laptop and forgetting it's plugged in when I take the laptop, etc. There are lots of chances to accidentally drop the phone or knock it to the floor.

        You'd think if people are buying expensive items they'd take better care of them.

        I don't know what you do with your phone, but I actually *use* my phone, why carry a $600 device ar

    • I've always bought the super-extended warranty-surance when I buy a Dell laptop. I generally buy a rather nice one, and I use it to make money. A day of downtime costs more than the warranty to cover 3 years, and next-day service is very nice. It covers anything I do as long as I can still read the service tag ID on the bottom of the unit. (For good measure, I tape over the service tag with clear tape to make good and sure that it's readable)

      I have a similar warranty on my nice smart phone (currently a Razr

      • I've always bought the super-extended warranty-surance when I buy a Dell laptop.

        I've had to use the extended warranty that I bought on my Dell laptop to fix an unusably loose power jack. But even with the warranty, it was still far less expensive than buying a MacBook Air just for the MagSafe connector.

  • Here's the deal... (Score:5, Insightful)

    by msauve ( 701917 ) on Friday May 03, 2013 @05:36PM (#43624487)
    When they sell you an extended warranty, they're doing it to make money. They have a much broader base to analyze, and they're very good at calculating how much to charge vs. how much they'll have to pay out, to end up with a profit.

    It's the same with all insurance. However, unlike life, or health, or car insurance, where there's a low, but finite risk of being out a huge amount without insurance, with product warranties you're out no more that what you've already paid.

    So, long term, no, they're not a good deal. Put the same money in the bank and you'll be ahead on average. Sure, there's risk you can still end up worse off, but not catastrophically.
    • by stanjo74 ( 922718 ) on Friday May 03, 2013 @05:49PM (#43624635)
      Exactly this. For non-catastrophic things, be self-insured. If you can afford to pay for a replacement, pay yourself the insurance premium. The insurance company has already done the work for you to analyze the risk and come up with an insurance premium number.
      • by crath ( 80215 )

        The advice I've replied to is exactly right. In my case, I fly almost every week on business, and I buy my own laptop. By the end of the second year, I almost always experience some type of failure in my laptop--either failure of a component or an accident (liquid into the keyboard). I always buy the all-perils warranty for my laptop and I always come out ahead. I am out at the extreme upper end of the bell curve, and so I benefit at the expense of the insurance company.

        One of the benefits of the warran

      • by Coppit ( 2441 )

        Unless you have kids. In that case take the extended warranty -- you are the outside of their distribution.

        On the FIRST DAY of having our iPad I walk in on my toddler standing on top of it. WTF WOULD POSSESS HIM TO DO THAT? I enjoyed all of 2 hours of clear screen. Now GMail looks like a haunted house.

    • by green1 ( 322787 )

      I agree. However it's actually worse than the picture you paint. because you aren't just analyzing the chance of product failure, you also have to calculate the likelihood of actually being able to claim the warranty. Most vendors are very good at weaseling out of claims! (There's a small scratch on the case from normal wear and tear? no warranty for you! must have been abuse to cause the damage!) (you fixed it yourself 2 years ago for a completely unrelated issues? no warranty for you!) (you didn't follow

      • Salespeople push them because they make an instant commission off of them. Radio Shack workers mostly get minimum wage.
    • by Intropy ( 2009018 ) on Friday May 03, 2013 @06:01PM (#43624773)

      The information is asymmetric both ways when accidental damage is covered. They are going to charge enough to make a profit overall. That is true. But if you know you are accident prone, or have kids that break everything, or something to that effect that is covered, and the warranty company does not know that, you can still have an expected positive return.

    • with product warranties you're out no more that what you've already paid.

      Its probably better to look at it as being out the lesser of the use value or replacement cost of the product, which, unless it was discontinued with no equivalent substitute or you purchased it on some kind of wild promotional deal, is probably less than "what you've already paid".

      Which just makes the case even stronger against them.

    • by houghi ( 78078 )

      If everybody is honest, it is a good deal. You pay a little, but you get a lot. However many people will try to scam the insurance part. e.g. if they want a new phone or a new tablet, because the old one is a year old, they will suddenly have a broken item.

      This then will bring the price up for others, because, as you said, they want to make money. This will then mean that the dishonest person will be more likely to take the deal, because he will come out positive in the end. The higher prices will scare awa

  • If that many people break their devices, then the insurance premiums must be commensurately high, or they will not pay out. There's no way around that. An insurance salesman telling you that lots of accidents happen but that premiums are low is lying about something.

    • Not necessarily. Unlike, say, car insurance? Selling device insurance is predicated on the assumption of more than just percentage, but in timespan.

      Consider that you pay something like $10/mo for your $200 smartphone - not even two years in, and the thing is paid for at original price. One year in, and the device is likely amortized down enough to get a replacement phone of the same make/model for what the customer paid into it so far.

      I'm sure there are other aspects as well, but that one stood out for me.

  • I just see it as a sign for a lasting product. The seller believes in the reliability of the product, so he offers an extended warranty. So I prefer to buy things where the warranty is offered, but I don't take the warranty.
    • by jedidiah ( 1196 )

      No. The sign of a lasting product is a warranty that completely negates an extended warranty entirely.

      Aftermarket warranties are usually scams. Like all forms of insurance, they tend to never cover your set of circumstances or they come with fees.

      Modern extended warranties come with all manner of fees. So they're even more of a scam than the used to be.

    • by msauve ( 701917 )
      Such warranties are not usually offered by the manufacturer (except direct sellers). If they believed in their products, they'd just offer a longer standard warranty. How much they believe in their product is related more to how much they charge for the extended warranty, not whether they offer one. Retailers typically push third-party warranties for everything they sell.
  • If you can afford to replace the device being covered, than they don't make sense. If you can't afford to replace the device, then it may be worth it, because even if it's a losing money proposition on average, it's worth it for the security of not having an unlikely event wipe you out.

    That is, I don't have an extended warranty for my computer, because if it dies unexpectedly I can afford to get a new one right away. I do have an extended warranty for my car because if the engine dies unexpectedly that wo

    • by msauve ( 701917 )
      It you can't afford to replace (or fix) the device, you shouldn't be buying it in the first place. It's just like Las Vegas, the odds are never in your favor.
      • So you shouldn't by a car unless you have enough cash on hand to not only pay for the car itself, but to buy a replacement if it fails?

        • by gl4ss ( 559668 )

          So you shouldn't by a car unless you have enough cash on hand to not only pay for the car itself, but to buy a replacement if it fails?

          technically, yeah, unless you're buying the car just as a luxury item and the rules don't count.

          if you're relying on having a car then you should buy a cheaper car, so that you can either buy a new one or finance a new one if it breaks(and then you would need to immediately save up again to replace that one). this is why many people buy expensive car insurance that will pay out enough to replace their car.

          that's what all the "smart living" books would tell you anyways.

  • I worked with a guy whose sister and brother-in-law worked for Mastercare (the warranty arm of Dixons (a "tech" shop like Best Buy)). They only extended warranties that they or anyone they worked with took were for washing machines. They said everything else wasn't worth it.
  • by vux984 ( 928602 ) on Friday May 03, 2013 @05:41PM (#43624551)

    The question is unanswerable without knowing the cost, and the terms, and what it covers.

    A local electronics store has an extended warranty program where you pay X$ for the extended warranty, and if you don't use it, when the warranty is finished, you get a gift certificate for X$ to use, on any purchase over 2 x X$.

    So in 2005 I bought a $5000 DLP TV, and paid ~$500 for 5 year extended warranty, which I didn't end up using. In 2010 I bought a new LED backlit LCD for $2200, and used the $500 gift certificate.

    Admittedly there is a bit a claim process to go through (much like MIR processes -- fill out an online form, warranty plan number, name, address, etc..), and you only have 6 months or a year or something -- it wasn't unreasonably sort, but there was a limit, after the extended warranty expires in which to make the claim,.

    I felt it was really a tremendous value.

    I gave the old TV to my parents and it lasted another 3 years before the color wheel motor finally died.

  • I normally don't get them, unless the product I'm buying can be reasonably expected to last a long time, and the warranty includes some extras.

    When I got a Dell U2410 monitor I got the five-year plan on it, because it offers advance exchange, and I expect a monitor to last five years at least. And I got a plan on my fridge, but that plan also includes a free annual maintenance check, and a discount on parts and filters.

    If the warranties didn't offer those extras, I probably wouldn't have bothered.

  • Most Visa and American Express cards come with a perk that will extend the original manufacturer's warranty for an additional year simply by purchasing the item with their credit card. The additional year is covered by the credit card company and usually has to be negotiated through them, but buying accidental protection coverage with that credit card extends that coverage for a year too. YMMV, check with your credit card company.
  • by Voyager529 ( 1363959 ) <[voyager529] [at] []> on Friday May 03, 2013 @05:47PM (#43624617)

    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.

    • by pmontra ( 738736 )
      I bought a next business day care pack from HP with my laptop back in 2006 and I used it a few times. It was a good investment and they delivered assistance on time.
  • I hardly ever purchase the extended warranty, reasons following the caveats :)

    If the item is over $100 AND the item is a necessity that frequently breaks (I can't count the number of vacuums I've had to buy over the years that have just flat-out failed) AND the warranty is reasonably priced (I'll pay about more than that).

    The reasons that I *don't* usually buy the warranty is that I take care of my shit. I've had more smartphones than I can count and have only had 1 single incident that req
  • by PhotoJim ( 813785 ) <jim@p h o t o j i> on Friday May 03, 2013 @05:48PM (#43624625) Homepage

    The people who want to buy extended warranties that cover accidental damage tend to have accidental damage more often than those that don't. We call this moral hazard.

    What that means? Being careful with your stuff will pay off disproportionately compared to the cost of this insurance.

    Also, given that most residential insurance policies have deductibles of $500 or $1,000, I don't think the loss of a few-hundred-dollar smartphone is exactly a catastrophic loss compared to having someone steal your car or having a kitchen fire.

  • Check the specific terms, but usually no. IMHO.
    The extended warranty company already has your money. They have every incentive not to give any of it back in the form of a repair.

    I had this exact issue with an extended warranty on a slightly used car. Something broke, but as part of the chain of breaking parts was a non-covered part, the timing belt (a consumable), everything after that was not covered. The initial break was a covered part, but that did not matter.
    Their default answer was deny, deny, deny.
    • Yeah, they were trying to screw you. A timing belt is a "consumable" the same way a clutch plate is a "consumable." Sure, they'll need replacement eventually, but any part not scheduled for replacement within the warranty term should not be exempt from the warranty.

  • Decades ago (aka, mid 80s) this unique-to-my-city electronics joint opened up. Best Buy sized long before BB was around. During their grand opening, they had fog machines going,laser light shows, booth babes, the whole 9 yards.
    My friend goes in and buys a laserdisc player from them, and buys an extended 3 year warranty as well. The extended warranty however, wasn't through the manufacturer of the LD player, but rather the store itself. Paid a ruddy fortune for the extended warranty as I recall (almost as mu

  • If you're bargaining the price of a purchase down, note that the cost of an extended warranty may be negotiable too.

    In Australia (Harvey Norman) I was offered a 3 year extended warranty on a laser printer for $50, supposedly reduced from $75. I declined. Some minutes later he offered me the same warranty for $30 and I accepted. The laser snuffed it about 5 months after all warranties expired. :(

  • With their 5 day guarantee, if they don't have a refurbished item ready to ship back, why would they ever reimburse the original purchase price if their warranties are typically 12-15%? It would be cheaper to just refund the warranty cost.

    The company promises to either fix an item and ship it back within five days of receiving it, or reimburse the customer for the itemâ(TM)s purchase price. If one of those two things doesn't happen in five days, SquareTrade refunds the warranty price.

  • by miroku000 ( 2791465 ) on Friday May 03, 2013 @05:56PM (#43624713)
    It depends on how easy it is to get it fixed. For example, Dell's laptop warranty is awesome. They come out to your house withing like 48 hours and fix it on the spot. That's a lot different from shipping your laptop off somewhere and getting it back in two weeks. On the other hand, I am not willing to buy an extended warranty on most tablets because it is easier to just buy a new one when it breaks. Cell phones are similar. You often pay $50 to get the same kind of phone you had before. But that phone is probably free now (if you extend your contract.)
  • If it's a bleeding edge thing yes I will buy an extended warranty.

    For example I bought an extended warranty on my first large screen TV. Good thing I did too becuase the guts failed twice on it and I ended up with 3x the warranty cost being free repairs. Later ones are a lot cheaper and a lot more reliable.

    Other stuff not so much. I bought one on a car because of the price - 8 year coverage for $1000 on a $40,000 car. Odds are pretty favorable the this one will pay off.

  • I've had two projectors. The first had $400 replacement lamps, while the second had $300 replacements. That was MSRP, comparison shopping yielded $300 and $250 respectively (knock another $100 off for knock-offs with extremely bad reviews). At the time mackcam offered lamp replacement warranties for $110 that covered two replacements during the first two years. Both times I got two replacements lamps out of the warranty with no hassle at all. Definitely worth the price.

    The value of the warranty was so great

  • Insurance (Score:4, Insightful)

    by frisket ( 149522 ) <peter @ s i> on Friday May 03, 2013 @06:13PM (#43624901) Homepage
    They're not warranties. They don't warrant anything at all. They're just insurance. Once you get that clear, it's a straight choice on the basis of cost vs benefit. A real warranty penalises the manufacturer for shoddy goods or inadequate service by making them make good the deficit. That is not the case here.
  • As the Uk experience with PPI and extended warranties shows. You cant watch daytime tv in teh UK with out seeing loads of adds for lawyers trying to get people to claim that they where misold extended warranties and PPI insurance .
  • I always purchase extended warranties for my laptop computers, and almost every time, I've had to use it. In each case, the covered repair would have cost more than the extended warranty did. Laptops use many components that are specific to that model and are costly to replace.

    However, I never purchase extended warranties on desktop computers, and rarely on other devices.

    • I've never bought an extended warranty for anything, and I've never needed one. Anecdote annihilation!
      • I've never bought an extended warranty for anything, and I've never needed one. Anecdote annihilation!

        I bought a hard disk recorder, which had a power supply rated for 24 Watt, while the hard disk recorder used 23 Watt in standby. That isn't going to work. After 15 months, the power supply broke. Replaced it with a 60 watt one from eBay. Next hard disk recorder I bought extended warranty. Which paid for the next one when the hard disk broke down. I even got a free extended warranty! Which paid for the next one when switching between programs got slower and slower. If they keep breaking down, I'm set for liv

  • It depends on a number of factors. First of all, before you go ahead and buy that expensive accidental damage protection from the manufacturer, check with your home or renter's insurance provider to see if they offer floater items. Mine covers theft and accidental damage in *and* outside of the home for much less than it would cost from the manufacturer. As for extended warranties, well that's really a calculation of many variables, but mainly: what's it worth to you? What is the original warranty perio
  • We made the mistake of buying Electrolux fridge and dishwasher. An extended warranty for the two cost us 300+. However, we have had over 10 visits on the 2 and invoked lemon law on dishwasher. Now we have kitchenaide with no issues. However we have had over 5 visits for fridge with different issues, but they have to be more than 1 month apart. With this next call(yeah we have a call in), we will have to invoke lemon law again. And we will switch to kitchen aide. If u buy some appliance from overseas get e
  • by mikefocke ( 64233 ) <(mike.focke) (at) (> on Friday May 03, 2013 @07:22PM (#43625445)

    Because they base their judgement on the amount paid out versus the amount paid in. And their figures year ago on auto "extended warranties" was ~30% of what people paid in got returned in the form of expenses to repair, 70% went to selling, overhead, administration, etc.

    Why does every clerk selling you something try and sell the warranty/insurance? Because all the management get bonuses, the selling company gets something, the insurer gets something, etc. That money isn't returned to the consumer in benefits.

    I'm 70, have made it a habit of insuring to the hilt everything I can't afford to pay for (house, auto, liability, umbrella rider, etc). For all products I decline coverage because I can afford (with some pain) to pay for them. I'm way way ahead.

    Extended warranties are like a casino, a very few win, some break even and the average loses big. Except casinos pay out at much higher rates...some more than 95%.

    Before you buy, do some research on the latest profit and loss statement from the insurer. Oh, and insurers often do go bust only to reform the next day under a new name, same management.

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