Why you probably don't need that extended warranty

Why you probably don't need that extended warranty

Summary: A study by ConsumerReports.org suggests that non-savvy consumers will fork out a total of $1.6 billion on warranties this year. Newsflash - they're not worth the money!

SHARE:
TOPICS: Hardware
16

A study by ConsumerReports.org suggests that non-savvy consumers will fork out a total of $1.6 billion on warranties this year.  Newsflash - they're not worth the money!

Extended warranties and service plans are a great gig for the retailer.  When they sell you a TV for $500 they make around $10 on that sale, but when they sell a $100 warranty, they get to keep $50.  When you look at the math, it's pretty easy to see why the salespeople push the extended warranties so hard on the consumer (personally, I always find this switch in sales pitch quite amusing - before you buy the item it's described as robust and reliable, but once you're committed to buying and the issue of a service plan comes around, all of a sudden the item in question is fragile and unreliable!). 

[poll id=31]

But why are extended warranties such a bad idea?  Surely they protect the consumer from additional cost and downtime?  Well, think about it:

  • How likely is an item to fail within the warranty period? 
  • How much are you saving if the item does break?
  • What's covered by the warranty?  What's not?

 No matter how you cut it, a warranty like this is stacked against the consumer. 

It's worth pointing out that the report does recommend extended warranties for two items.  These are:

  • Rear-projection microdisplay TV
    It seems that these sets are three times more likely to need repairing that other TVs, and repair costs are quite high
  • Apple computers
    Because you only get 90 day free telephone tech support (after that it's $49 a call)

Both of these scenarios make it worth considering the additional cost of an extended warranty.  However, don't walk blindly into an extended warranty.  Make sure that you are absolutely clear as to what you are getting for your money - don't rely on anything said to you by a salesperson, you need to see a written copy of the terms and conditions.  In my experience salespeople very often distort reality when it comes to extended warranty coverage. (Who am I kidding? They distort reality on a regular basis.)

What have your experiences with extended warranties been?  Has an extended warranty or service plan ever saved you a lot of cash or have they always been money down the drain? Or was it worth it for the peace of mind?

Topic: Hardware

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

16 comments
Log in or register to join the discussion
  • Extended warranties

    That may be true for a lot of things, but I'll tell you one item you would be crazy not to put one on. Laptops. Most laptops come with a 1 year warranty. Now if you get a real cheap one, then maybe not, but if you get an expensive one, you'ed be crazy not to. For one, if most laptops break, (mainboard, or screen)and they are out of warranty, there is no repair option, (unless you REALLY like to spend money) If you spend $1000-2000 or even more on your laptop, get the extended warranty. Usually these warranties will give you the money back on the laptop you purchased if it is unrepairable.(screen or mainboard) Since laptops are always getting faster, and cheaper, you come out WAY ahead. For example, you bought a centrino laptop three years ago. Top of the line, 60 gig hard drive 2 ghz processor, and 1 gig of ram (overpriced I might add) then now you could get a core 2 duo, or Turion 64 X2 64bit laptop (if you need 64bit AMD is the only choice, as Intel's laptop processors are not 64bit, only the desktops, and Xeons.) with twice the ram, better faster, and larger hard drive, and dedicated video built in for the same price. BTW an extended warranty for a laptop usually is $300. Yes, it's a large amount, but it's cheap compared to buying a new one. (for the better laptops) I fix computers for a living, so I know. largely its hard drives that go bad, but I have seen my share of screens, and mainboards die. If you buy a laptop that is an Intel whitebook, then you can now get the keyboard, screen, battery, hard drive, and power supply replaced, as there is now a standard for them. For the mainboard there still is no standard. My extended warranty I got gets you two replacement batteries. This also makes the warranty worth it, as the batteries are worth well over $100 each.
    A. Noid
  • When it makes sense to purchase an extended warranty

    BTW I tried to do this via a track but they appear to be down:

    Just over two years ago we purchased a new front load washer from Sears Canada. The machine has done an excellent job and has easily saved its purchase price in electricity and water savings. Just as the warranty came to an end Sears called us and offered us an extended warranty....

    http://www.notesfromatooluser.com/2006/11/nightmare_with_.html
    mlevison
  • Look into Best Buy's warranty

    I agree that most of these things are trash but I've had the Best Buy ones pay off a couple of times. Why, because they cover [b]any[/b] cause of the problem. If you've got a couple of teenagers like I do then you know that they can break most anything. With a BB extended warranty you just bring in the iPod that got run over by the car and they replace it. Sweet.
    slopoke
    • Best Buy Warranty covers NOTHING

      What a joke! Best Buy's PSP specifically excludes coverage for "accidental damage, intentional physical damage, condensation, fire, viruses, loss or damage to stored data, or computer hardware that is added to the original purchase, spilled liquids, insect infestation, rodents, misuse, abuse, missing or altered serial numbers, rust, or damage caused by non-authorized service personnel."

      What else is there that could cause failure? Their warranty covers NOTHING. I learned this the hard way, and will NEVER EVER EVER do business of any sort with Best Buy.

      OTOH, Circuit City's protection plan specifically INCLUDES coverage for accidental damage, spills, etc.
      mschaublin
  • Extended Warranties.. How I love them...

    The way I keep my electronics vs the amount I use these extended warranties boggles me. I pay the utmost attention to cleaning them (with proper cleaners), and not handling them incorrectly..

    But for some reason, many electronics I have bought do fail on me.

    I have had 2 harddrives in 2 months fail, I had a LCD screen on a laptop fail, I've had a car deck fail 2 times within my warranty period. I've had a 50" Rear Projection fail after 3 months. I've had a factory OEM motherboard fry on me.

    The list just goes on.. I have bad luck with electronics which boggles me. I treat them better than I treat my wife (according to her anyways). :P
    ju1ce
  • Extended Warranties in Florida

    Worth every cent if they cover damage from lightning strike -- which many mfr warranties do not do. My Sony XBR Trinitron power supply was zapped and unusable -- my extended warranty picked up the $600 charge. Glad I had it.
    baja463
  • Only a few

    I generally avoid them. They wouldn't sell them so hard if they didn't come out ahead most of the time. But I have found laptop computers to be flakier things than most, so I buy them there, and it's been about a break-even so far. (I bought an HP extended warranty through Costco for less than half the same plan from HP directly!)

    Also after one dead Palm, I bought a replacement plan for the new Palm, and that's about to pay off by buying yet another new palm now that the second one has died.

    So, I buy them on things I think have a high likelihood of failure, but avoid them in general.
    charley cross
    • they're so worth it

      My wife bought me a Canon DV camera for xmas one year - exactly 25 later the DV output went so you couldn't get the video off the camera into the computer. The store said Canon needs $250 just to look at it. I bought a new Panasonic (3CCD) DV cam (never Canon again) and the extended 4 year warranty for $150. I know that they'll be upgrading my camera befor the expiry date of the warranty.

      My neighbor bought the extended warranty on a cheap VCR a few years ago - if failed, it was replaced by a VCR DVD combo. That failed, it was replaced by a DVD recorder. I think that was worth it.

      I bought the kids these team branded 512 mg mp3 players for $30 each. They upsold me on the warranty for $6! I'm crazy not to - guaranteed these will fail in 3 years and I'll be upgraded. This crap is designed to fail.
      mhatlelid9
  • I play with the salesmen's minds...

    ... it goes like this...

    Salesman: "And what about an extended warranty sir? In case of technical problems or breakdowns"

    Me: "You mean this product breaks easily? I'm not buying an unreliable product"

    Salesman: "No no no no!!! It's VERY reliable - it won't break down"

    Me: "Well if it won't break I don't need your warranty do I?"

    Salesman: "Err...." [fx: face contorts into panic stricken grimace as he tries to figure out how to sell without losing the customer]

    It's petty of me perhaps, but it's an interesting form of revenge on them for inflicting their crass sales techniques on me. They usually are completely stymied by "sell me an extended warranty and it's too unreliable to buy".
    bportlock
  • Alternate viewpoint

    I have had more positive experience with extended warranties. I purchased an additional 2-year warranty with ACER America for my laptop. I had some problems with my touch bad during the second year. This would not have been covered by the original warranty. Not only did they expeditiously fix my touch pad, they replaced the HDD that I had complained was running too hot and replaced a port panel cover which I had cracked. I was very pleased with their responsiveness and service and happy with the peace of mind the warranty provided.

    Now, I shall duck and prepare for the flames of the malcontent and disgruntled.
    primate9
    • Good to hear the positive stories too!

      Thanks!
      Adrian Kingsley-Hughes
  • Alternative

    I recently spent about $5000AU on a Home Entertainment System.
    The sale assistant was a friend of a friend and when it came the time to 'suggest' the extended warranty he informed me that it was far better to have a decent Home and Contents insurance policy which covered all electrical goods.
    If your huge LCD/Plasma screen dies, but then suddenly falls of your entertainment stand whilst being cleaned accidental damage cover should suffice.
    barnzy9
  • An Extended Warranty Horror Story...

    Ok.. It's about 3 weeks too late for Halloween, but the point is worth making.

    About a year and a half or so ago, a friend of mine who does computer repair got a call from one of his clients. The client bought a Compaq PC about 4 years previous with a 5 year extended warranty from Fry's Electronics. The network card in computer, it seems, died. The machine stopped talking with his network.

    So, my friend did a full backup of the computer's data and they trudged off to Fried and stood in line, waited for about a half an hour (the service dept queue was rather long) and when they finally got to the front of the line, the Fried technician took the computer into their custody and told him that it would take about 48 hours to diagnose the problem. They gave him a loaner computer for duration.

    Six weeks later... Yes.. WEEKS. They got a call from Fried telling them the machine was fixed and come pick it up. They did. To make a really long story short, the computer wasn't fixed. The computer wasn't talking to the network.

    After a bit of diagnosis, a call to Compaq's tech support, and so forth, the logical cause of the problem wasn't the network card, it was the motherboard itself. Of course, telling the technicians at Fried was quite insulting to them. They know damn well how to diagnose the problem and how to fix it... NOT! You can't argue with know it alls.

    Back to Fried, another hour spent in line, another loaner, another six weeks (yes, weeks!) later, they got the computer back again, and STILL, it would not talk to any other machine.

    They repeated this cycle a total of 5 times. On the last trip to Fried, they lost the computer entirely. When they went to pick it up, it was nowhere to be found. Either way - given the terms of the contract, Fried owed him a new computer.

    Was it worth it? You be the judge. Let's add up the additional costs involved in this 3 ring circus.

    Backing up his data, burning it onto a CD, and restoring it onto the loaners - to the tune of at least an hour each time @ $50 an hour x 12 times = $600.00

    10 trips to Fried, 1 hour each (give or take). Time is money. He had to spend at least 10 hours standing in line when he could have been doing something else.

    For the $600 spent on the back ups and restores done, the guy could have BOUGHT a brand new computer. Additionally, if you really think about it, without the extended warranty and the hoops in question and about half the money spent, the guy could have got a new motherboard, CPU and RAM and would have been up and running in a couple of hours - including installation of drivers and such for the new hardware.

    So, in retrospect, no, it wasn't worth it. Computers as the business stands, are obsolete in a very short time anyhow. Newer and faster technology is on the horizon and by the time it shows up on the store shelves, it's pretty much obsolete - because the next day, you just KNOW someone's coming out with a newer, faster, more powerful rig.
    Wolfie2K3
    • Thanks for sharing ...

      ... horror story indeed!
      Adrian Kingsley-Hughes
  • Extended warranty sales hassle

    If the product is so bad that I would need an extended warranty, I don't want it.

    "But..."

    You have the answer.
    Tom Bl
  • Fry's About to be Fried/Got any Good Credible Incidents?

    We bought Fujitsu take me to the moon Inspiron and extended warranty from Fry's. The CPU fan stopped working dropped it off at Fry's. After 2 month's they call and say it is ready.

    We go to the store, they put the computer up on the counter. It is literally smashed to bits. CD rom cover broken off side, monitor screen won't close, the sides of the case are broken through. It looks like it tumbled end over end out of the back of a truck.

    They take a dozen pictures of it and I tell them will replace it with a new computer. They said due to paper work it will take a few days. A month goes buy, I get a letter from repair department saying the computer is ready. I ask if it is a new one. They say they didn't know anything about that the manager would call me. No calls come.

    I get another letter two weeks later saying that because they were unable to get hold of me they were sending me a letter instead. I call them and tell them we did talk, do you have the new computer. They say they will have the manager call. This goes on for another two months.

    I call up and tell them since I have to travel 200 miles round trip to the store and have gone through this merry go round for now 5 months they will have 30 minutes form when I get there to replace unit as they said they were. I get there and the manager says, ?It is in legal status and I don?t have time to deal with you?. I ask him what does he mean by ?legal status? and he repeats he doesn?t have time to deal with me. I send them a fax telling them to respond immediately as to what was the status of the matter

    Next I get a letter from Fry's saying that I owe them $818.00 for not returning the loaner.

    Oh, by the way, the way, my computer that they smashed to bit, when they put up on the counter saying it was repaired......................... the CPU fan still didn?t work.

    Also, I had a call from a foul mouthed tarantula by the name of Jada Waylan that started off the conversation by telling me, ?I don?t smile and kiss anyone?s butt?. It went downhill from there.

    Now here is going to be the happy ending.........................when I sit their butts down in a deposition I am going to have them puking all over themselves.

    I don?t care if I burn through a few bucks to get them on a certified court transcript making fools of themselves and distribute it for a few months at all of their stores.

    Let me know of any problems you may have and if they are credible I can ask them about them too. The more evidence the better.
    The Badger