If Companies Believed In Their Products, Why Would They Need To Sell You An Extended Warranty?

from the like-insurance-in-blackjack dept

Hopefully, most people know this already, but given that it's the time of the year when people do lots of electronics shopping it's nice to see Consumer Reports reminding people that extended warranties are a bad deal (via Hardware 2.0). Most of the time, the products are unlikely to break within the warranty period, or if they do, the cost of repairing them is not much more than the warranty itself. For products that do break often, all too frequently the warranty has an out that doesn't cover the specific problem. Yet, retailers continue to push them because they're basically pure profit. In fact, since Consumer Reports claims retailers keep about 50% of the price of a warranty and only a tiny percentage on goods sold, they often make a lot more money selling you a $100 warranty than a $400 TV. A totally different report claims that retailers actually keep 80% of the price of a warranty and includes an example of a warranty not always covering what the buyer expected. Of course, none of this talks about the other big problem with the rise of warranty programs -- it's basically an admission that the products they sell aren't built to last. If products had a specific reputation for quality then no one would ever even think about buying an extended warranty -- cutting off this profit stream. In other words, the incentives are to build a product that's just good enough to last a little while, but not good enough to be problem free. Some say that this decrease in quality makes plenty of sense when there's constant innovation and prices continue to drop, to the point that it's often cheaper and better to buy the latest version every few years rather than making sure you get a really solid product. However, it certainly creates a fine line that often ends up with customers feeling ripped off -- which is rarely good for business.

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  • identicon
    Dan, 21 Nov 2006 @ 2:33am

    Is maddening! "We don't make it very well any more, but that's ok. For a nominal fee, we will guaranty it lasts until "X" I say we all get together and market some thing simple like universal remotes and not offer the sale of extended warranty, but advertise it as a given. Like zippo lighters, hand tools from sear's etc.

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  • identicon
    Jim Gramze, 21 Nov 2006 @ 2:50am

    Never extend the warranty

    I've bought a lot of stuff with the money I've saved by never getting an extended warranty. I'm always giving things away to family and friends to get something new and better long before the products I buy fail. There is no point to it. The proof is in how they are always pushing extended warranties for everything you buy.

    One exception for me. I use my PDA a lot every day and I drop it on a hard surface about once a year and break the glass. For this reason I get the Dell extended warranty that amounts to catastrophic no fault insurance -- swap with a refurb.

    But unless you know you are likely to break it, never ever get an extended warranty. If they insist, ask why they are selling you a defective product.

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  • icon
    JeroenW (profile), 21 Nov 2006 @ 2:56am

    household appliances it sometimes make sense

    I did get an extended warranty on my washing machine. 75 euros to extend from three to five years. And just after three years something broke, repair bill would have been 163 euros.

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  • identicon
    Sean, 21 Nov 2006 @ 3:10am

    rip-off is correct

    I used to work in Sales for futureshop and the extended warranty is the best way for a sales rep to make a good monthly income. Essentially the sales rep is trying to con you into buying a worthless peice of paper so that he can put bread on his table.

    Don't buy it.

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  • identicon
    dorpus, 21 Nov 2006 @ 3:15am

    Depends on the product

    With digital watches, I've found no relationship between quality and price. If anything, the more expensive watches are huge, bulky, and have large glass plates that are easily scratched.

    I found a $20 watch last week with a studded rim to protect the glass plate, has all the standard functions, displays the date and time all on one screen, I'm a happy camper.

    For automobiles though, I've made full use of the extended warranty. It saved me a bundle.

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  • identicon
    Bull Shifter, 21 Nov 2006 @ 3:22am

    WTF?

    You start out, basically, stating that buying a warranty is a rip off. You actually end up with what, in essence, is a strong argument to purchase an extended warranty. Your headline should have read "Warranties, I'm all over the road with this one."

    I think this is pretty much another example of the "corporate paranoia conspiracy theory" which states that big companies are out to ruin our lives.

    You come up with some funny stuff on here, Mikey.

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    • icon
      Mike (profile), 21 Nov 2006 @ 2:57pm

      Re: WTF?

      You start out, basically, stating that buying a warranty is a rip off. You actually end up with what, in essence, is a strong argument to purchase an extended warranty.

      That's odd. I don't see how my final point is in favor of warranties. It's very much the opposite. I say that warranties encourage the wrong behavior, and that leads to angry customers.

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  • identicon
    Louis, 21 Nov 2006 @ 4:26am

    Warranty

    I find the whole point of the Guarantee is only as an indication of the trust the manufacturers have in their product.

    The few times that I had something repaired or replaced that broke during the guarantee period (usually items have the clever tendency to break a few days after the guarantee expired), I found that I could have saved myself a lot of stress by simply buying it new again, and usually the repaired item has a tendency to break again within a few months of being repaired... coincidently right after the Guarantee period expired.

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  • identicon
    TomforPres2020, 21 Nov 2006 @ 4:28am

    Warranties from Retailers

    I used to work for Sears and the extended warranty that we offered was meant to extend the manufacturers warranty. It had nothing to do with the corporations that actually made the product, like Sony or Panasonic, but everything to do with Sears making a quick buck. Here is what I always told people I liked. Sears is all about customer service...that's what they want to be known for. If you make a big enough stink, they'll let you return pretty much anything, and give you a replacement, or at least pro-rate it to see how much money you should get back. They do the exact same thing for those that buy the extended warranty, just without you having to go to all the trouble of getting angry at the department manager. So, essentially, you're paying for a less confrontational return policy.
    At least that was the case when I worked there six years ago.

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  • identicon
    Jedi Wannabe, 21 Nov 2006 @ 4:36am

    Yes! Get the warranty

    I am employed by an extended warranty company. And yes, the sales people that sell the warranty will tell the customer that everything and the kitchen sink is covered. And Yes, the customer is sure feeling ripped off when we patiently explain that we only cover hardware repair on computers, not software. Or that we only send a tech to the house for repair on desktop towers - that monitors, printers, and laptops are mail-in service only.

    But knowing all of this, if the customer has a machine that for whatever reason has frequent hardware failures, the cost of the warranty is far better than the cost of the several repairs if they had to pay someone personally.

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    • identicon
      hilarious, 1 Dec 2006 @ 7:10pm

      Re: Yes! Get the warranty

      1) you work for an extended warranty company yet your argument sounds ever so refreshing and unbiased. how do you maintain such indifference?

      2) you mean to tell me that they make towers that fail so often that they actually EXPECT it to happen to the extent of offering to fix it when it happens for a flat rate over a period of time?

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  • identicon
    IAN, 21 Nov 2006 @ 4:56am

    WARRANTY

    The thing that you need to realise is that often when you are purchasing an extended warranty you are not buying it from the manufacturer at all, you are buying it from the retail outlet where you bought it from. I am from the uk and if i buy a sony TV from currys, then if it breaks down then it will be a currys engineer who comes to fix it, not a sony one. the extended warranty is the same, it is not an admission from the manufacturer that the product is poor(which it may or may not be) its the shop trying to tag on a higher margin item with your purchase. The same goes for scart leads and other accessories that the store will try to sell you along with your main purchase.

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  • identicon
    Zwxphtt, 21 Nov 2006 @ 5:13am

    It's the same

    exact thing with car rentals, etc..how many times have they
    tried to sell you insurance even if you state your insurance will cover you and you don't need theirs. I mean they will almost break down and cry to get that money. I never buy any kind of extended warranty at all.
    Zwx

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  • identicon
    Jake Bell, 21 Nov 2006 @ 5:28am

    Extended Warranty

    Car salesmen are always pushing the "extended warranty" when you by a new car. My answer, if I need to buy the extended warranty for this car, I don't want the car, because it must not be very well built. The salesmen at this point says something stupid because they don't know how to answer. Oh, and that usually is the end of any attempt to sell add on's as the salesmen doesn't want to be made to look like the fool he or she really is again.

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    • identicon
      ebrke, 21 Nov 2006 @ 7:16am

      Re: Extended Warranty

      My answer to the new car salesman's pitch was " . . . but I have owned 3 models over 15 years and they have always been really reliable. I can't see why I would need an extended warranty." What's he going to say, they're not making them as well as they used to?

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    • identicon
      AJ, 22 Nov 2006 @ 7:58am

      Re: Extended Warranty

      >My answer, if I need to buy the extended warranty for
      >this car, I don't want the car, because it must not be
      >very well built.

      Not always. However well designed, any mechanical part can break...between parts and labor, it could work out well for you.

      I hated to "bet against the car" but.... the standard warranty was 3/36 (at the time), and I knew I would be keeping the car longer than that; I bit the bullet and bought a 7/75k warranty.

      my car shop charges 80/hr for labor...and there are several parts for my vehicle that approach 1000.

      At 64k miles, the water pump started to die. 500.
      At the same time, I also had the power seat motor replaced. Another 300.

      Because of the warranty, those repairs didn't cost me a dime.

      Point is, that particular repair does not make the car a POS, but given the cost of even a couple of repairs, and the warranty pays for itself.

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      • identicon
        Mike, 22 Nov 2006 @ 9:05am

        Re: Re: Extended Warranty

        You say those repairs didn't cost you a dime, yet you paid for the extended warranty... that being said how much did you pay for that warrant?

        The only time if any you benefit from an extended warranty is when the cost of repair exceeds that of the extended warranty cost and most of the time that never happens. The insurance calculates all this to make money.

        When it comes to auto warranties they are the worst, with way too many loop holes, and deductibles. I remember the one time I did get the warranty on a car, it was $1800 for the warranty with a $50 deductible. Now what the sales guy had forgot to mention was that the $50 deductible is per incident, so if you need 3 things fixed on one repair you pay $150, also diagnostic isn't covered, so I need to pay the shop to find out what is wrong, so multiply hours by $60 - $90..... lets just say that I ended up paying close to $900 for an $1800 repair, yet in the first place I payed $1800 for the warranty, who loses, I do!

        What was even worse is that they tried charging me for stuff that was covered, but the legal type made it sound like it wasn't, example Strut mount is not part of the strut but part of the car ( when you by a strut it doesn't come with the mount ) so it was more hassle then it was worth. Also you don't get to pick the shop they do. I could keep going about all the bad things but I'm sure you all get the drift.

        Over the years working at an electronic retailer I know that they make money on extended warranties, I remember one year where during a meeting they stated the company had lost money but due to extended warranty sales they made $14 million.

        In short, I make money, a lot of money on extended warranties. Would I by them? nope.

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        • identicon
          AJ, 22 Nov 2006 @ 1:17pm

          Re: Re: Re: Extended Warranty

          >You say those repairs didn't cost you a dime, yet you
          >paid for the extended warranty... that being said how
          >much did you pay for that warrant?

          >The only time if any you benefit from an extended
          >warranty is when the cost of repair exceeds that of the
          >extended warranty cost and most of the time that
          >never happens.

          I agree, most of the time it doesn't, but knowing the cost of some repairs, I took the gamble, and it has paid off, in that the total cost of repairs has indeed surpassed the cost of the warranty.

          The warranty I'm talking about is a zero deductible GMPP Gold (General Motors Protection Plan) on a Chevrolet, so no issue with where I take it. It clearly states unless it is a light bulb, wear item (tire, brake pad, or windshield wiper insert), it's covered.
          Exceptions are misuse/abuse, or extreme user mods (so piston damage from NO2 would not be covered :) ).

          To bring it back to the 'consumer electronics' level, I have yet to buy an extended warranty on appliances or other electronics, usually because by the time it breaks, if it breaks, something better and cheaper is usually out, making it more cost effective (in my mind) to replace than repair.

          Beyond that, (perhaps) I've been fortunate in that the few electronics I've owned that died did so within the standard warranty period.

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  • identicon
    Suprised again., 21 Nov 2006 @ 5:30am

    Agree

    I am an In-store computer tech for Circuit City(my Dept is now know known as Firedogs) and I agree with both #8 and #9. While it may feel like a rip-off if you never have to use it, its like your car insurance, you don't really see the benefit untill some asshole hits you. I have seen a few lemons go out the door in the last 2 years, (nothing CCITY can control, we don't build the machines); machines that have serial failures that would have cost more than the unit was worth to fix. and the warranty and extended warranty just keeps fixing them.

    So while it may seem like a rip-off, its there to protect your investment in case something happens.

    Now, on the other-hand, how it it sold and what is explained to the customer about what it covers is not always correct. I frequently go behind sales reps and explain to customers that software is not covered, which leads to explaining the importance of making the backup disks, of installing antivirus/antispyware software, etc.

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    • identicon
      Jedi Wannabe, 21 Nov 2006 @ 6:00am

      Re: Agree

      Boy how I wish there were more people like you at the stores that sell our extended warranties. Then the customer would understand (or at least had it explained to them more honestly) Thanks for being there.

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    • identicon
      D2R2OP3C, 21 Nov 2006 @ 8:35am

      Re: Agree

      When I worked for Blockbuster years ago, I had a customer come in who had a Circuit City unirom on. He was pissed.

      I asked him what was wrong and he said he got fired for not offering one customer an extended warranty. He told me that if I ever wanted to work there, I have to offer it to blind and deaf people otherwise I would get fired on the first offense.

      How moronic. I never worked there.. if fact, I never shop there.. Best Buy is better by far.

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    • identicon
      Anonymous Coward, 21 Nov 2006 @ 11:40am

      Re: Agree

      I have seen a few lemons go out the door in the last 2 years, (nothing CCITY can control, we don't build the machines)...
      The old,"we don't build 'em, we just sell 'em" defense. The idea that they can't control whether they sell lemons or not is absurd. They may not make them, but they don't have to sell them either.

      ...machines that have serial failures that would have cost more than the unit was worth to fix. and the warranty and extended warranty just keeps fixing them.
      How's that? It's my understanding that the "Circuit City Advantage Protection Plan" expires with the first claim. No continuing coverage for lemons.

      Now, on the other-hand, how it it sold and what is explained to the customer about what it covers is not always correct.
      Really? Isn't that fraudulent?

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  • identicon
    Terry, 21 Nov 2006 @ 5:36am

    Warranties??? HA!!

    Dare I mention the Xbox 360??? Oops, just did. Go figure Nintendo and Sony released their new systems with a minimum 1 year warranty, but Micro$oft gives you a 90 day warranty. I can get better warranties on refurbished stuff, without paying extra!!!!!!! We are all slaves... And yes I am no exception, I was dumb enough to buy an Xbox...

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  • identicon
    Someone, 21 Nov 2006 @ 5:37am

    BBE: See base of tin

    I'd be in favour of forcing all products to have a best before date on them.

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  • identicon
    Frank, 21 Nov 2006 @ 5:56am

    I work at a retailer as a technician that fixes products and I agree that the warranties are a waste on certain things. There is also a difference between places that offer an extension of the manufacturer and places like where I work that has warranties that include extra things the manufacturer doesnt cover in which cas eits a good idea on big ticket items. But if you're a cheapskate that doesnt buy the warranty. then dont come in and bitch at me when I wont fix or replace it 95 days after you bought it when it breaks and only had a 90 day warranty. The place you purchase an item IS NOT the company that made it so dont yell at us when it breaks and we dont fix it. On a a side note if nobody bought a service contract/warranty the items you buy would cost about 30% more because retailers need to make money and most big ticket items they sell make the company little or no margin by them selves. Hence the reason for high markup on accessories as well.

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  • identicon
    Nobody Special, 21 Nov 2006 @ 5:57am

    Need to get it straight.

    1) Most often the manufacturer is not involved in the extended warranty at all. The retailer is selling an insurance policy. And insurance policies by nature are designed to bring in more then they give out.

    2) There are several reasons things "don't last like they used to." One of the reasons is that we aren't willing to spend what we sued to. Also, the miniaturization eliminates the feasibility of repair. But consider that most items getting thrown away are still working. In short, we don't keep things like we used to.

    3) Extended warranties are really insurance policies. And the typical warranty covering a class of products has to assume the worst case scenario. So the cost of covering the TV sitting still is the same as the cost of covering the MP3 player you will likely drop several times on your morning runs.

    4) Take time to read the coverage. Some of these only take effect after the original coverage. Others allow you to exchange the item at the store. The ones Circuit City sells allow you a one time refund of the purchase price (of the merchandise) on the condition you return ship all items in the box to the warranty center.

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  • identicon
    Chris Whiteford, 21 Nov 2006 @ 5:58am

    For a Projection TV it is worth it

    I am on my second Projection TV only because my first died on me and I had the warranty and got a brand new tv to replace it two years ago which now my second one is still waiting to be repaired but thankfully I had the extended warranty on this one too. Don't get me wrong for pretty much anything else I wouldn't but Projection TVs break down.

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  • identicon
    Anonymous Coward, 21 Nov 2006 @ 5:59am

    I bought an xbox 360 and an extended warranty for $50US. I am on my 3rd 360.

    While I agree the extended warranties are a waste of money in most cases, there are certain items where I wouldn't be without one.

    New consoles are one of them. Laptops are another.

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  • identicon
    gdog05, 21 Nov 2006 @ 6:05am

    Shit in a box

    Tommy: 'Course it does. Ya think if you leave that box under your pillow at night, the Guarantee Fairy might come by and leave a quarter.

    Ted: What's your point?

    Tommy: The point is, how do you know the Guarantee Fairy isn't a crazy glue sniffer? "Building model airplanes" says the little fairy, but we're not buying it. Next thing you know, there's money missing off the dresser and your daughter's knocked up, I seen it a hundred times.

    Ted: But why do they put a guarantee on the box then?

    Tommy: Because they know all they solda ya was a guaranteed piece of shit. That's all it is. Hey, if you want me to take a dump in a box and mark it guaranteed, I will. I got spare time. But for right now, for your sake, for your daughter's sake, ya might wanna think about buying a quality item from me.

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  • identicon
    Wizard Prang, 21 Nov 2006 @ 6:07am

    Extended warranty? Just say no, except...

    When I purchased a TV a few years back, I did a little background reading and heard a lot of variations on the theme of "nice but sometimes unreliable". One week they were doing $50 off, which was about the price of the extended warranty. Something told me to go ahead and get the extended warranty, so I did.

    Just over a year later the TV went out. Fixing it would have run about $150 if I had had to pay for it. A tech came out to my house and fixed it for free. I'm glad that I got it. My only complaint was that they took nearly two weeks to get it sorted out.

    My advice, stay away from extended warranties, but if you get one, check for some kind of "we will fix it in X days" service-level agreement.

    Have you noticed that some stores are "spiking the punch" by reducing their warranty coverage to 90 or even 30 days?

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  • identicon
    John, 21 Nov 2006 @ 6:38am

    After losing an iPod 3rd generation due to a hard drive failure I gladly bought the extended Apple Care on my new iPod video. I want to make sure I get a few years out of a $400 device that rarely leaves my side. Apple Care came in handy on my first Power Book also. However, I bought an extended warranty at Staples for Palm Zire and it did no good. After a year it made a terrible buzzing sound (like fingernails on a chalkboard) and the warranty servicer claimed they didn't cover the defect. The Staples/Palm deal was a $380 mistake, but both instances I've had with Apple Care to replace the case on my PowerBook and repair my new iPod have come in handy.

    I think it depends on several factors: who's product is being sold, who's servicing the warranty, how high-end is the item and it's expected life time.

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  • identicon
    Anonymous Coward, 21 Nov 2006 @ 6:41am

    The problem here is not the warranties. It's that nobody takes enough pride in their craftsmanship to make good-quality products anymore. For example, take KVM switches. The old PS/2 ones were solid as a rock. Now with PCs dumping PS/2 ports left and right (which is stupid), we're forced to buy USB KVM switches. Find me a USB KVM that actually works worth a hoot and doesn't cost an arm and a leg. There isn't one. Everybody out there is only trying to make a quick buck by creating a cheap piece of crap and selling it at significant markup. And then they further exploit the issue by selling extended warranties. They know blame well that their product is not going to last, but they don't care, so long as they get your money. Such is the world we live in these days.

    When I build PCs for people, I don't compromise and use cheap crap for parts. I use good-quality, name-brand parts to build solid, good-performing PCs, and I have never provided a warranty for them, because they don't need one. The oldest ones I built are now around 3-4 years old, and to this date, the only failures I've had are two bad hard drives, which show up once in a while no matter what brand you buy. In each case, a quick RMA later, I had the system was back up and running again for the customer, without any significant data loss. Now in the case of Dell, I beg people not to buy them, and if they insist on it, I beg them to buy the 3-year warranty for them. Where I work, we use all Dell Optiplex workstations, and I have dealt with TONS of hardware failures due to various defective parts and design flaws, the worst cases being the old slim 20GB Maxtor hard drives in the GX260 and the motherboards in the GX270. Most of these failures show up approx. 2-2.5 years into their life cycle. Would we save money buy simply buying replacement parts instead of the warranties? Perhaps, but it's worth us to have an overnight parts replacement delivery service to minimize downtime.

    In some cases, the warranty is definitely necessary. But if the stuff was decent quality to begin with, we wouldn't even be having this conversation.

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  • identicon
    Curiosume, 21 Nov 2006 @ 6:47am

    Only Laptops and only the manufacturer policy

    I never buy the warranty's from resellers (Circuit City, Best Buy, etc). I busted out laughing when I bought a fan this summer from Best Buy....the gal was trying to sell me an extended warranty on the FAN(not even an electronic one, just a straight up fan). I let her know that I realized that she was just doing her job....but that it was a FAN, a motor that spun a blade, how difficult could it be to fix? I do have a Thinkpad that I bought the accidental Protection Plan on....best couple of hundred bucks I've ever spent. I've had 4 pieces of hardware replaced. Three of them I was about to just swap out (battery, power supply, stylus) and one a tech came within a business day to replace something. All of the hardware replacements but one have been because I'm hard on things.....not manufacturer defect. I still have two more years on the policy. Peace, Cathie

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  • identicon
    anonymous coward, 21 Nov 2006 @ 6:48am

    warrenty work

    You know, I do a lot of warranty work for several manufacturers that I will not mention here...but...I can say that a lot of them don't give us enough for doing the warranty work. er on Also, some others (think fruit) like to penalize you for using more than one part to fix something. Even if the problem is the cause of 2 parts failing, they just assume you misdiagnosed the problem. And on top of all that, they use cheep plastics that easily break off so that a part HAS TO be replaced more often than not.

    Parts also can take weeks to get here because they are "backordered" then we get the wrong parts and have to send it back to get the right one. Don't even get me started on laptops.

    Warranty is a joke...

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  • identicon
    MCeeP, 21 Nov 2006 @ 6:54am

    nintendo

    speaking of nintendo, not only do they offer a minimum 1 year warranty, if you register your Wii on their website, they extended the warranty another 90 days FREE. Now that's the kind of trust in a product I like to see :)

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  • identicon
    C.G., 21 Nov 2006 @ 7:04am

    Numbers game

    Extended warranties are a numbers game and free money for those who sell them. The companies pay an insurance on any potential claim against the policy - a portion of that fee goes to that and the rest is pure profits. Insurers can calculate that a certain percentage of people will 1. need to use it; 2. have/remember the paperwork for it; and 3. qualify based on the exclusions. The probability of someone using the extended warranty is so slim that the small fee they paid for the insurance on the policy they took out on your extended purchase more than makes up for those people who are successful. The insurers themselves wouldn't be selling the insurance policy on extended warranties if they themselves didn't make money. Nobody Special had it right.

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  • identicon
    Matt, 21 Nov 2006 @ 7:19am

    computer warranties

    Everyone here has a good point and I like to give me two cents.

    As a VAR for Dell Computers I am able to get a 3 year warranty less then a 1 year warranty and if a customer wants a nice laptop over $1000 it is better to offer then the mobile protection plan because you can run it over with a car or spoil coffee on it and it will be replaced. That is a nice advantage.

    Car/truck warranty

    Buying a used truck or car getting a warranty might not be bad also and you could include it in the financing package. I like the one I bought for a used Truck. I was able to get a refund since I did not use the warranty.

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  • identicon
    Anonymous Coward, 21 Nov 2006 @ 7:42am

    You know what I find funny here. While many many good points are made. Everyone seems to hate anyone who is trying to make money. Like literally hate any business, any company that tries to make a profit. I completely understand when a company is cheating, lying or manipulating information to turn a profit, that's just wrong. But seriously, stop bitching about everyone who wants to make money.

    Some day you might be in that position, I'd really like to see you stick to the values you proclaim when that happens.

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    • icon
      Mike (profile), 21 Nov 2006 @ 9:30am

      Re:

      Everyone seems to hate anyone who is trying to make money. Like literally hate any business, any company that tries to make a profit.

      I don't think that's the case at all. People have no problem with companies making money by offering real value. What they have a problem with is underhanded methods and companies trying to make money by offering inferior products and then charging extra to fix their awful products.

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  • identicon
    Ira Feldman, 21 Nov 2006 @ 7:51am

    Nothing new here. Nearly 50 years ago Vance packard coined the phrase 'Planned Obsolescence'. Fifty years later we see the grandchild of the concept in these extended warranties.

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  • identicon
    Iain, 21 Nov 2006 @ 8:19am

    Extended warranties on electronics are generally offered by the retailer, not the manufacturing company. Of course this can vary, but stores like BestBuy, Circuit City, etc are replacing and repairing defective items themselves or through a 3rd party. Even extended warranties for automobiles are the same way.

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  • identicon
    Bob, 21 Nov 2006 @ 8:41am

    Good point #30 I guess everyone here wnats every company to just break even. Even if they did that these people would still bitch about something. Its impossible to run a company and make everyone happy. Most of the people who bitch about comapnies making money have no idea how a business works. If they dropped the sales of warranty's and lowered the markup on accessories like cables etc.. Nobody would buy the computers because we would be back to the early 90's where desktops were 1500.00 for an economy model and laptops would be 2500 to 3000 dollars. They dont understand the reason the sell warranties and mark up accessories is so you can buy your 500.00 laptop. They dont realize most retailers either lose money or break even on computer sales if the customer doesnt buy anything else. This Friday is black friday where if nobody bought anything but the doorbusters which usually happens companies like Best Buy, Circuit City, CompUsa etc... will do 200,000 dollars in PC business and lose 20,000 in margin. This is hoe they make up that loss.

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  • identicon
    D2R2OP3C, 21 Nov 2006 @ 8:43am

    HEY #30

    #30 -

    It's not about hating those who make money. It's about those who capitalize on the stupidity of others. It's about those who take advantage of the weak minded.

    I would love to find out how many times an older lady or man got completely ripped off by someone in the tech depot just because they didn't understand.

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  • identicon
    Jeeper8788, 21 Nov 2006 @ 8:46am

    computer service plans

    i work at best buy in the computer department. even though we are not on commission they still tell us to push the service plan (AKA Performance service plan) we make next to nothing, if not lose money on the computers we sell. we need to make up for that loss by selling PSP's and highly priced USB cables.

    I also worked at a computer shop troubleshooting, and if you ask me computers now days are garbage. computers two days old would come in with bad hard drives and power supplies! to deal with the manufacture with these problems is a big hassle. its a heck of alot easer just to bring your computer back into best buy, have the incompetent geek squad repair it, or if its beyond repair they will give you a brand new one right off the shelf, or something similar.

    for about 150 bucks on a 700 dollar computer for a 3 year plan, i say its worth it most of the time if you don't know anything about fixing computers, because chances are something is going to go bad in the computer.

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  • identicon
    Rick, 21 Nov 2006 @ 8:49am

    Let's call is what it is..... Insurance

    So some people have good stories and some have bad. It kind of like gambling, some will win but some also have to lose for it to make sense. I think the whole idea of calling it an "extended warranty" is the problem. Lets call it what it is... insurance. Actually, insurance is almost like gambling too. I see people at work getting extra cancer insurance from aflac. Why? You already have life and medical insurance. I see the extra cancer insurance being a lot like an extended warranty, which is a lot like gambling.

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  • identicon
    Divakar, 21 Nov 2006 @ 9:04am

    Extended Warranty - Some times it's a blessing

    I bought a used Honda 2001 CRV SE on decemeber 2002, and the sales guy tried to sell me an extended warranty which I was not very keen about, but something made me buy the 480$ extended warranty. But two weeks ago when I took my car for a 70000 mile service the technician said that I have a distorted oil gasket, rear bushings broken and some other thing and it would cost me around 1300 bucks to get everything (that's another con all the dealership services pull) first I was devastated that I have to spend that much an amount. Then I rememebered about the warranty I bought and when they checked yeah everything was covered and I have to pay 0 dollars. Well in this case I was happy I made that investment. But as the author says most of the time this doesn't happen though.

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  • identicon
    xxl3w, 21 Nov 2006 @ 9:26am

    Why?

    Why has over 6 people repeated "extended warranties aren't the manafacturer". We get it already. It's STRAIGHT! Move on.

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  • identicon
    Anon, 21 Nov 2006 @ 9:37am

    Agree...sort of

    Yes, extended warranties are big margin for the people selling them. As the cost of consumer electronics go down and everybody is having to compete more and more with companies the size of Dell, Sony etc. etc. The margin on these items is quickly disapearing. Yes, extended warranties are big margin for the people selling them. As the cost of consumer electronics go down and everybody is having to compete more and more with companies the size of Dell, Sony etc. etc. The margin on these items is quickly disappearing. Warranty is one of the few ways to be able to make any margin off of a sale. That being said, they are often an unnecessary up-sell, just to pad the margin on a sale.

    There are however times that they are a good idea. I enter into a lot of competitive bids where customers are requiring LOW priced PCs, laptops etc. Usually what that means is putting together a quote using components that may not be terrible product but may not have the reliability of higher end (more expensive) components. If you buy 50 PCs for a school, because of a hamstrung budget you can only afford PCs with sub-standard reliability but you expect the machines to last for the next 5 years, you might want to think about the extended warranty, as parts are surly going to fail before you EOL the product.

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  • identicon
    Tim, 21 Nov 2006 @ 9:42am

    50% Profit

    I used to manage a retail store, my P&L statement LITERALY showed 50% profit for all Extended Service Plans sold. These are huge profit items.

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  • identicon
    Anonymous Coward, 21 Nov 2006 @ 10:16am

    It worked out OK for me

    I bought a very expensive TV a few years about and got a really good deal - the sales person would only sell it to me at $1000 discount if I bought the $200 extended warranty.
    Still a saving of $800 so I bought the TV.

    1 day after the regular 1 year warranty ended the TV stopped working.

    The problem was some burt out pieces. The repaired I saw the bill was for $1500 ($1000 for parts $500 for labour). The TV only cost $2000 after the $1000 discount.

    99% the time I do not get the extended warranty but this time I was happy I did get it.

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  • identicon
    Anonymous Coward, 21 Nov 2006 @ 11:52am

    I don't get them

    Because I can't be bothered to keep track of the paperwork for it.

    Maybe I'm too lazy to waste money? hrmm...

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  • identicon
    Panda, 21 Nov 2006 @ 12:27pm

    Macs

    I had an iBook that failed routinely every three months. On the third repair they gave me a free one. That one failed after a year and a half. Not having 3 years warranty coverage (from the time of purchasing the original), I had to buy a whole new laptop as the cost of a new logic board made fixing it uneconomical. I will never, ever buy a Mac without the extended warranty again.

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  • identicon
    Bullshifter Isbraindead, 21 Nov 2006 @ 2:04pm

    give me a break

    Okay seriously whoever this bull shifter guy is couldn't be bothered to read the article to the final line i guess, not sure where you came up with that "all over the road" crap but I"m sure it came from somewhere below your waist. This article is pretty clear about the fact that it's often cheaper to buy 2 of the product than it is to buy one with the warranty... Not sure how that's going all over the road but people only see what they want to see I guess.

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  • identicon
    zarquon, 21 Nov 2006 @ 2:54pm

    i think you've got something backwards

    look at craftsman tools. a pretty much infinite warranty, and a very good reputation for quality. what companies figure is that people will get the warranty, then very seldom come back to redeem it, making the profit margin larger.

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  • identicon
    Bob, 21 Nov 2006 @ 7:39pm

    Yeah Craftsman tools are great and come with a lifetime warranty but you also pay $45.00 for a hammer. When you could just as easily buy one for $7.50 at Walmart. Point being if everything was built well and had an exceptional warranty the price would be double or triple what you pay now and then people would complain that everything is too expensive.

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  • identicon
    dave, 21 Nov 2006 @ 8:09pm

    so let me get this right

    so big companies are out to make money......ok..... isn't that why everyone starts a company in the first place?.

    the company that's selling you the product is out to make a buck (or more likelly a lot), so they use substandard parts in the items they manufacture, "cut corners".
    Big retailers offers you an EW, also to make a buck and to cover the crappy items they are selling.

    I work at a electronic repair shop that deals with a big retailer, and let me tell you, there is a lot of junk that comes thru our door from them.

    I do believe there are certain manufacturers and certain items that do not last enough to cover the manufacturer warranty, and conveniently enough usually what goes wrong with it isn't covered.

    I think it's all about being a smart consumer, ultimatelly as a consumer you have a choice and a right, if you want to get the extended warranty ask the sales person questions, don't listen to the sale pitch, and make sure you understand what's is expected of both parties

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    • identicon
      Anonymous Coward, 22 Nov 2006 @ 3:02am

      Re: so let me get this right

      I think it's all about being a smart consumer, ultimatelly as a consumer you have a choice and a right, if you want to get the extended warranty ask the sales person questions, don't listen to the sale pitch, and make sure you understand what's is expected of both parties
      Don't listen to the sales pitch is right. In fact, don't believe anything the salesperson tells you. The extended warranty provider had a _lawyer_ draw the thing up for them and if you really want to understand all the implications of the thing you'll need to have a lawyer look it for you too. Doesn't sound like such a good idea now, does it?

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  • identicon
    mike, 21 Nov 2006 @ 8:54pm

    Open a book.

    A Warranty signals to the 'smart' consumer that the product is high quality. That's why.

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  • identicon
    Geek, 21 Nov 2006 @ 9:03pm

    WRONG

    This is just regurgitated generic crap. If you ever worked in warranty fulfillment you would know that certain products - best example: laptops - need extended warranties that span the lifetime of the product. And you should do some more research on extended warranty programs. They offer other value points besides repair. They offer better terms than the original manufacturer's warranty, including *performance* guaranty and at least here in Canada the programs I've worked with have BETTER terms than the manufacturers' warranty.

    And they aren't pure profit, they are high profit. Extended warranties from anyone but the manufacturer are essentially insurance policies. The merchant buys the policy and makes a margin on it, just like anything else.

    What the retail store is doing is picking up where the manufacturers fell short. If you want to do a real story why don't you focus on the manufacturer's warranty. Now there is a rip off. Products intended for 3 years of use should not have 12-month warranties.

    Look at how warranty shops get paid. Look at AppleCare in particular.

    The merchants are doing you a favor offering the extended warranty. Its like saying that insurance is a waste of money. It's about certainty, and that is something I'm willing to pay for - on certain relevant items.

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  • identicon
    metastable, 21 Nov 2006 @ 9:39pm

    paragraphs

    I think Mike needs to use his extended warranty to get the 'return' or 'enter' key fixed on his keyboard. Dude, break up that dense monster paragraph a bit, spare your readers' eyes.

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  • identicon
    Scud, 21 Nov 2006 @ 11:11pm

    Ok... Reply to #54

    What Geek said in reply 54: "And they aren't pure profit, they are high profit. Extended warranties from anyone but the manufacturer are essentially insurance policies. The merchant buys the policy and makes a margin on it, just like anything else." --- Yes... "insurance policies"... They have been known to be "amazing" deals... Read the fine print (yes there's always a "fine print...") Your are pretty much screwed unless your electronia "dissolves" by itself. The MTBF is ALWAYS much longer than any warranty, and when it finally fails - buy a new and better "box" for the money you saved on "nothing"... Screw the rats out of their Christmas bonuses - say, "no!" to extended warranties.

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  • identicon
    Matt, 21 Nov 2006 @ 11:13pm

    think about it

    I work for a major electronics retailer and i do sell their extended warranty. I dont think its the best thing for all of my customers so i do not push it but i do give them the benifits of the warranty and let them make an informed decision.
    i am also very tired of people who refuse the extended warranty coming back 13 months or more later complaining and yelling that their product broke. i really want to say "i didnt build it, its not my fault. I guess you should have gotten the extended warranty ya jackass."
    Anyway if you want to shop at a retailer be nice about it. let your salesperson do their job and offer the solutions they are told to. if you do not want them all you have to do is politly decline. just dont go back and try to complain if you get burnt by not getting the extended warranty.

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  • identicon
    Brian, 21 Nov 2006 @ 11:34pm

    I think they are good for some items, but not all

    I am a big beleiver of Extended warranties for PC's , Notebooks, Cars, and other large appliances. Personally extended warranties have saved me over AU$5000 in the last 5 or so years. I sell them to my customers wherever I think it is warranted, but its not something you need for everything. You need to weigh up the following things. How much is the item to replace, how much and how long is the warranty, what does it cover, and what is the likelyhood of the item failing. An educated and experienced answer to each of these questions will give you the answer to whether or not extended warranty is worthwhile for the item you are buying .

    While I think that some retailers are just selling crap, its a fact of life in the electronics market at least that things do fail, even the "quality" items. Selling extended warranty isnt a reflection of their trust, its commonsense for some items, and a good add on sale for the rest of the items.

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    • identicon
      Anonymous Coward, 22 Nov 2006 @ 3:04am

      Re: I think they are good for some items, but not

      I am a big beleiver of Extended warranties for PC's , Notebooks, Cars, and other large appliances.
      I'm a big believer in alien abductions.

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  • identicon
    Mustafa, Sears Appliance Salesperson, 21 Nov 2006 @ 11:37pm

    Get the Service Agreement, not Extended Warranties

    Working as a Sears Appliance Consultive Salesperson, I would like to say that if possible, whenever you are buying something and the retailer offers you a extended warranty, Don't get them. Opt instead for another competitor retailer which either provides a service or replacement agreement on it.
    Extended Warranties basically extend the original coverage of the manufacturer's warranty while Service or replacement agreements, you get your moneys worth out of it.

    I sell alot of Sears Service Agreements on the appliances and have complete faith in them. Whenever getting a Service Agreement, always make sure to ask if it provides free annual preventative maintenance check ups for the duration of its coverage.
    Are all service calls and repairs covered? What are the exemptions and exclusions that would void that agreement?

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  • identicon
    Brad, 21 Nov 2006 @ 11:42pm

    Accidental Coverage

    If you buy accidental coverage, then accidently break your product, and recieve a replacement, I think it more than pays for itself...

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  • identicon
    Rob, 22 Nov 2006 @ 12:28am

    For some things, it is worth the extra money to buy the extended warranty, but you must take into account many variables when deciding, such as item cost, probable cost of a repair, item quality, cost of extended warranty, and the length of the included warranty. Sometimes, you can even wait until the last day of the original warranty to purchase the extended one, and the time between then and the day you purchased the item can be used for further research on the quality of the product, or for just getting a feel of it's build quality. There is no 'one size fits all' philosophy towards extended warranties, but basically, if I a planning on keeping the item for a long time, and the extended warranty's cost is 10% of the product's price per year of coverage or less, I MAY buy it.

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  • identicon
    jp, 22 Nov 2006 @ 2:12am

    the only thing that is "guaranteed" when you leave the retail store is that you paid 200 dollars for an extended warranty, not that your item will break down. 1pt for retail store, 0pt for you! think bout that....

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    • identicon
      Anonymous Coward, 22 Nov 2006 @ 3:07am

      Re:

      the only thing that is "guaranteed" when you leave the retail store is that you paid 200 dollars for an extended warranty, not that your item will break down. 1pt for retail store, 0pt for you! think bout that....
      I don't like thinking. That's why I always ask the salesperson for "advice".

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  • identicon
    Yep, it's true, I took intro econ!, 22 Nov 2006 @ 3:11am

    Mike, clean it up!

    First off, lets assume that, in its view, a company's only purpose is to make money.

    Clearly, the way it does this by creating a product that sells for more than its cost (price > cost).

    Now, all products (or at least almost all) are required to come with implied warranties. This can have two effects: the price of the product increases due to manufacturing costs (a product that actually performs its declared function is more costly to make than one that does not); or, the price of the product increases to cover the cost of replacing defective units (cost of replacement * probablity of replacement = delta cost, which roughly equals delta price).

    So, a component of the cost of ALL products is a warranty of some sort. At the least, it is the governmentally required implied warranty; sometimes there is an explicit warranty that is sold with the product. Either way, you pay for it.

    An extended warranty is nothing more than its name -- an extension to the warranty. It increases the value of the implied warranty by extending the breadth (types of problems covered) and duration.

    The proportion of a warranty's makeup (implied or explicitly included at purchase vs. extended) is arbitrary. Manufacturers determine the proportion using one general rule: maximize profits. They do this by implying (or explicity including with the purchase price) a warranty valued such that it permits pricing of the product such that the quantity of the product sold is the quantity at which the elasticity of the demand for this product is unitary (essentially charging little enough so that lots of people will want to buy it while still keeping their margins up). Additionally, the manufacturers must include a warranty such that they compete in the market they are actually aiming for (the doodad market rather than the doodad-that-doesn't-even-work-and-thus-is-garbage market). The net result is an included warranty whose value is as low as possible in (other words, as low as that of a subsitute product's warranty), thereby giving the manufacturer "room to maneuver" by allowing high margins, but also, if necessary, low prices to boost volume. The remainder of the available warranty on the product is of the "extended" variety.

    The extended warranty is offered to those who want a more valuable product -- a product that, if it breaks in some way, will be replaced. The cost of making a better product is typically already reflected in the base-level sale price; this is because it wouldn't make sense to add value to a product and depend on recouping its cost in the extended warranty because not all consumers will purchase the extended warranty, opening oneself up to potential losses. Thus, the extended warranty's cost is simply probablity of replacement under new terms of warranty * cost of replacement. The price of the extended warranty is whatever price leads to the quantity which results in unitary elasticity of demand for the extended warranty specifically offered.

    Now that, hopefully, we can agree on what warranties actually are, I'd like to debunk a few of Mike's points.

    "If Companies Believed In Their Products, Why Would They Need To Sell You An Extended Warranty?"

    The reason companies sell extended warranties has nothing to do with believing in their products. They analyze the market, find a price that results in maximum profit (the volume vs. margins consideration), and sell. They break up the warranty into included and extended portions to take advantage of different markets, which are subject to different demands, and require different prices to be fully taken advantage of. The advent of the extended warranty is the result of more efficient markets (perhaps more managers are paying attention in econ?), which, in the long run, through accurate incentivizing, creates a better world.

    "Of course, none of this talks about the other big problem with the rise of warranty programs -- it's basically an admission that the products they sell aren't built to last. If products had a specific reputation for quality then no one would ever even think about buying an extended warranty -- cutting off this profit stream."

    Obviously, there is a chance that any product will break. An extended warranty is no more an admission of this specific fact than life insurance is an admission of man's mortality; they both are reflections of common knowledge. The extended warranty's cost is, again, a function of the cost of replacement and probability of replacement; it's price is a function of cost and the market demand (in a competitive market, the price will be forced down to cost). Even if a product had a "specific reputation for quality", there would still be an extended warranty whose cost, given specific terms, could be calculated, and who could be sold on a market, thereby giving us a saleable good. Perhaps a more comprehensive warranty could be included, but, of course, that would drive up the price. A buyer may derive some indication of the product's quality (read: probability of replacement) by analyzing the relationship between the cost of replacement and the cost of the warranty (it is the quotient of the two, in fact).

    "In other words, the incentives are to build a product that's just good enough to last a little while, but not good enough to be problem free."

    Yep, that is exactly what the incentives are. That's what they always have been. And that's what they always will be. As many economists note: there is no free lunch -- you get what you pay for.

    "Some say that this decrease in quality makes plenty of sense when there's constant innovation and prices continue to drop, to the point that it's often cheaper and better to buy the latest version every few years rather than making sure you get a really solid product. However, it certainly creates a fine line that often ends up with customers feeling ripped off -- which is rarely good for business."

    This is actually the part of the column which, in terms of analysis, I agree with. I'd like to point out, though, that if it is cheaper to "buy the latest version every few years rather than making sure you get a really solid product", than that is a more efficient use of resources (thanks price signals!), and our whole society benefits. Furthermore, there is really no cause for chicken-little-ing on the fine line issue; one of the beautiful parts about the free market is that firms who overstep that line eventually lose, and others learn from their mistakes.

    As for Bullshifted's comments -- I agree that Mike's analysis was hardly thorough. This results in a message that can be construed to mean different things by different people.

    My more general comment on extended warranties -- and everything, actually -- is: DON'T BE A SUCKER. At least skim the warranty before you drop a hundred bucks on it. Sometimes a company will miscalculate, or it will be a competitive market, or you will fail to fit their buyer profile, or something else, and then the purchase is worth it. Otherwise, it probably isn't.

    Finally:
    Mike, Techdirt is one of the best technology news sites on the internet. Don't let sloppy economics tarnish your (collective) name.

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    • identicon
      Not_Mike, 22 Nov 2006 @ 6:56am

      Re: Mike, clean it up!

      First off, lets assume that, in its view, a company's only purpose is to make money.
      I'm not willing to make that assumption. The people running it also have personal objectives, such as the desire to stay out of prison, that moderate what they are willing to do to "make money". But I'll agree that the desire for profit is the prime motivation.

      Clearly, the way it does this by creating a product that sells for more than its cost (price > cost).
      Bzzzt. Although profit requires that selling price exceed cost, it does not require the creation of products. A good example of that is a retailer that buys products to resell. Since this thread originally started off talking about consumer purchases of extended warranty insurance policies, I think we should clarify that we are talking about the type of situations in which these policies are purchased: Retail consumer purchases. Remember that consumers usually buy products from retailers, not manufacturers. The consumer is the retailer's customer and the retail supply chain (or simply "retailer") is the manufacturer's customer. The manufacturer's warranty is part of the product created by the manufacturer, bought by the retailer and resold to the consumer.

      So, a component of the cost of ALL products is a warranty of some sort. At the least, it is the governmentally required implied warranty; sometimes there is an explicit warranty that is sold with the product. Either way, you pay for it.
      We are talking about warranties that cover products that become defective after the sale. Implied warranties in general only require that products be as they are expected to be at the time of sale, otherwise the buyer got cheated. Implied warranties are intended to give the buyer some small legal protection. The laws protecting the seller are much stronger though. If ,for example, the buyer cheats the seller by trading a defective monetary instrument (hot check) for the product, the buyer can go to jail. So, mixing implied warranties and manufacturer's warranties is mixing apples and oranges. They serve different purposes.

      An extended warranty is nothing more than its name -- an extension to the warranty.
      Extended warranties are usually _not_ what their name implies. They do _not_ extend the manufacturer's liability. They are instead insurance policies and create liability instead for the insurer.

      It increases the value of the implied warranty by extending the breadth (types of problems covered) and duration.
      No, it doesn't. Implied warranties and manufacturer's are _not_ the same. Read what I wrote above.

      The reason companies sell extended warranties has nothing to do with believing in their products.
      It sounds like you are saying that extended warranty policies are sold by the products' creators (manufacturers). They typically are _not_. They are sold by others who had nothing to do the quality of the product in the first place.

      You then seem to go on to claim that the manufacturer determines how much of an extended warranty will available to the consumer. Not so. This is generally determined by the retailer, not the manufacturer. The manufacturer's warranty is in direct response to its customer's (the retailer's) demand. The consumer directly influences only the retailer. Most retailers however like to pretend to the consumer that they, the retailer, have no influence over the manufacturer, which is false. This is an attempt to avoid responsibility for the quality of products they sell in the eyes of their customer, the consumer. When in reality the manufacturers simply try to produce the quality the retailers want.

      Now that we, hopefully, better understand what warranties really are and who influences the manufacturers, I'd like to make a point.

      A consumer trying to make a decision about purchasing an extended warranty policy is at an extreme disadvantage in that he does not have enough information to make an informed decision: He does not know the likelihood of the product failure or cost of repair. Rest assured though that the insurer does. It has been suggested here that consumers should get the salesperson to answer all their question before purchasing a policy. I totally agree, and one of those questions should be "What is the numeric probability of failure of this product during the policy period and what is the median cost of repair?". Try to get a straight answer to that question. You won't. That should tell you something.

      Now, I'm not against insurance in general. Insurance is a good thing to have to protect you from catastrophic loss that you simply could not afford. But most electronic gadgets do not fall into this category and people buy these policies anyway in the hopes that the insurers have mistakenly under priced the policy and that they will come out ahead in the end. It's the same kind of wishful thinking that causes people to play the lotto.

      I'm Not_Mike, so I can't speak for him, but I think the point of his original article was to point out the duplicity of a retailer on the one hand trying to convince you that a product they are selling is worth buying and then turning around and telling you that it's bad enough that you'd better get insurance on it.

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  • identicon
    Judi Sohn, 22 Nov 2006 @ 4:19am

    It depends on the item. I wouldn't buy an extended warranty on a microwave or fridge, but if it covers accidental damage (when the manufacturer warranty does not) for a longer period and it's something that my kids will be handling? Then, yeah, I'll consider it. I just bought a Nintendo Wii and I paid the $30 for the warranty from EBGames.

    I'll also never buy a PDA without accidental coverage if I can help it. The chances of it needing repair due to my clumsiness makes it worth it. These extended warranties don't even try and fix the thing...they'll just replace it.

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  • identicon
    AngryOne, 22 Nov 2006 @ 5:15am

    WARRENTY

    I currently work for a major electronics strore, and from experience all I can tell you is that you everyday people who have never worked retail a day in your life should just stfu.

    For your consideration:
    Cordless phone batteries.

    Everyone knows that cordless phone batters eventually lose their charge, and then the phone is no good to you. What do you need to do? Go buy a new cordless phone battery... How much are they? Well, that could be as high as 35 dollars (Canadian). Or, at the time of purchase on the telephone itself, you could have baught an extended warrenty for around 20 bucks, and the retailer would replace your battery for free! Or even better yet, when you buy baught your first replacement cordless phone battery, you could have baught a replacement warrenty which would GUARANTEE you 2 replacement batteries for only 6.99. Total savings of approximately 60 bucks or so? Still think they're are rip off?

    Consider MP3 players. Now im not going to pick on RCA, they've brought us wonderful things like RCA cables, but their mp3 players arn't made of the most durable material in the world. So, you go and buy an RCA mp3 player for 100 bucks, but dont buy the warrenty, what happens, well you drop it and something internall faults up. What do you do now? Well if your within in your first years warranty, you can deal with RCA directly, and they might fix/send you a new one. Had you baught the mp3 players extended warrenty for only 20 bucks then what would our company have done for you? GAVE YOU A BRAND NEW ONE RIGHT OVER THE COUNTER WHEN YOU CAME IN AND COMPLAINED ABOUT SOMETHING YOU BROKE YOURSELF, IT DID NOT FALL TO THE GROUND AND BREAK ITSELF.

    And still some of you won't like what I'm telling you, so your still not going to buy extended warranties because your all a bunch of meat puppets who just have their strings pulled, and can't make up your minds yourself.

    Lets just now mention the final reason for you to buy extended warranties. When you buy them, and say for example nothing happens within the duration of the extended warranty and your item manages to survive in your clutches for 3 years. Well guess what, it wasn't a waste of money, and do you know why? BECAUSE IF YOU SAY THERE IS SOMETHING WRONG WITH IT (or you damage it yourself, but dont shatter the thing) AND WE CANT PROVE OTHERWISE, THEN WE WILL REPLACE THE THING FOR YOU WITH A NEW AND BETTER MODEL!!

    now that just sounds pretty sweet to me.

    Also, stfu all you people who are saying that things don't break within the warranty period. WHO CARES!!!!! AN EXTENDED WARRANTY IS LIKE CAR INSURANCE. YEAH YOU HAVE TO PAY FOR IT, AND HOPE YOU NEVER HAVE TO USE IT, BUT IF YOU EVER DO, OH BOY DOES IT PAY OFF!!!!!!!

    Also, make up your own minds people, im not telling you to go out and buy an extended warranty on everything you buy, buy them when you think your going to break them, or you know your 7 year old daughter will drop it, or your dog will poop on it.

    If you meat puppets take one thing from this message let it be this.

    MAKE UP YOUR OWN GODDAMN MINDS

    reply to this | link to this | view in chronology ]

  • identicon
    Justine, 22 Nov 2006 @ 5:19am

    Not Everything is an

    I work for a camera store and we sell an Extended Service Plan. It's not just an extended warranty. Sure it does extend the manufacturer's warranty for up to 4 years after it expires, but we also cover user error. We cover everything other than loss, theft, fire and cosmetic damage, so pretty much anything that anyone can do to affect the performance of their camera, or other products we sell, we'll have it fixed, or if it can't be fix it will be replaced. Personally I'd rather spend $48 dollars for a year of accident coverage on my $300 camera than drop it and break the screen and have the manufacturer refuse to fix it, and then be out $300.

    reply to this | link to this | view in chronology ]

  • identicon
    Andrew, 22 Nov 2006 @ 5:52am

    Very Special Cases

    I remember my first sales job at a big box store where they pushed a "performance guarantee", aka their Extended Service Plan. The details of the plan were different depending on what you purchased, and in 90% of cases it was worthless. The 10% came in the case of car audio speakers. At the time, you could blow your speakers, and get them replaced for free under the ESP. They could still technically play, and you'd be able to get them replaced because they didn't perform like new. If you were into car and home audio, you liked to play it loud, and you were hard on your equipment, it made sense.

    reply to this | link to this | view in chronology ]

  • identicon
    Brendan, 22 Nov 2006 @ 6:18am

    This argument is lame, it is an insurance policy you are buying on your product. How much money have you waisted on car insurance that you have never used? Exact same thing, extended warrenties and Product Service plans are there if you need them. Manufactures don't believ e in their products they make anymore, they are trying to reduce their warrenties again to 6 months for say TVs. I wouldn't want to buy a plasma, or LCD with 6 month warrenty.

    Right now I have a 32" Sharp Aquos with 2 dead pixels and the screen looks a little faided after about 8 months of use, do I care? No, because in 3 years I'll get a brand spanking new one that will be 110% better...

    reply to this | link to this | view in chronology ]

  • identicon
    Allexus, 24 Nov 2006 @ 8:49pm

    Extended Warrenties Not All Bad

    I work at a major electronics retailer chain (and NO, its not Best Buy) in the USA.

    I have sold cameras, PCs, and camcorders for a few years before I became a lead PC technician, opting for a less sales-centered view.

    I have to say that extended warrenties have a poor reputation, but the consumer's opinion is often slightly maladjusted because of unjustified fears of a sales person ripping them off.

    There are three products that I whole heartedly recommend someone to buy an extended warrenty for. Just three. I can justify other products, but not all products, but the three ones to always ALWAYS consider buying an extended warrenty for (no matter how many clueless 'consumer advocate' groups tell you not to) are:

    Laptops
    Camcorders
    Televisions

    Is it true that companies are admiting that products aren't built to last? Keep in mind that Japan being a major boon in the consumer electronics industry tends to have the mind set of buying newer and perceived better products as fast as they come out. Lets face it--with shrinking product margins and a highly competitive landscape as long as the product gets out the door in the consumer's hands and they're able to justify the product a lot of consumer electronics companies don't care.

    And then there's Sony. Exploding batteries, bad CCD imagers..this is just the face of a sick market.

    I've seen camcorders break. Granted, mostly these are the fickle DV camcorders with tape heads, but I am able to justify this category to recommend extended warrenties because they do wear out and break. If you think you're going to keep a camcorder for a good while, go with it. Trust me.

    As far as hard drive camcorders, newer DVD camcorders, etc go, I don't really focus on them. I personally know a lot about the different solutions available--but most people are looking for quality of picture--and hard drive and DVD camcorders just simply aren't up to par with higher end or midrange DV camcorders yet.

    As far as laptops go, depending on the extended warrenty, you do get some perks. Battery replacements aside, the turn around times are vastly superior to most limited warrenty, or for that matter, extended warrenty programs done by manufactuers.

    As far as televisions go--it really depends--I recommend them for Plasma especially, but not unless you're dropping a fair chunk of change based off of how much disposable income you have. It is truly better to be safe than sorry.

    Not to mention where I work most of the products you purchase are elegible for an (albeit more expensive) accidental damage coverage plan. This ensures that whether the product breaks due to mechanical or user failure, it will be repaired or replaced. And yes, it works. I have helped many customers blue in the face with their products successfully navigate the perils of submitting claims and getting products repaired.

    The top errors I've seen out of warrenty?

    Canon SD cameras-- "E10" error
    JVC camcorders--"Condensation Warning"
    Sony cameras--They just can be unreliable in general.

    But despire reliablity, the products do have great features. And Canon's tend to take rather descent pictures.

    reply to this | link to this | view in chronology ]

  • identicon
    kris, 30 Nov 2006 @ 12:54pm

    Warranties are made for a reason...

    If you buy a DLP tv and there is constant dips or spikes in your electricity in your area, and the lamp goes out, do you REALLY think the manufacturer will stand behind the product when they had no idea? There is no way, not only because that's not covered in a manufacturer's warranty, but also because they don't build products that can withstand all variables in a consumer's home. A service plan on a DLP tv for example, is usually $399 and is for 4 years, a brand new lamp costs between $250-500 and lasts only 6,000 hours. Average tv viewing will end up costing you up to $500. Some items only make sense to buy a warranty with because you never know. It has nothing to do with the product being good or bad, because in the labs where they test them, they all seem good.

    reply to this | link to this | view in chronology ]

    • identicon
      WilliamTell, 16 Dec 2006 @ 5:04pm

      Re: Warranties are made for a reason...

      I'm not sure where you are coming from Kris because it sounds like you are saying that you should spend the money on an EW on a DLP because the manuf. warranty does not cover a burnt bulb. I was just "educated" by a Future Shop salesman that "no" extended warranties cover the bulb because it is a consumeable item. Perhaps it's just theirs, I don't know. If this is the case, you would be better off buying a new bulb rather than an EW when you buy your DLP because you know it will burn out someday. FWIW, when the EW was sold to me, this little fact was buried, but it's made very clear in the fine print. The salesman told me "This warranty will cover absolutely any little thing that goes wrong with the TV - I mean anything!." What BS.
      Wil

      reply to this | link to this | view in chronology ]

  • identicon
    Richard Beninya, 20 Jun 2007 @ 11:43am

    This article...

    If you do not pay too much for the extended warranty it is an advantage, as opposed to paying ridiculous prices for repairs after the initial warranty is over.

    reply to this | link to this | view in chronology ]


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