Are retailer extended warranties worth it?

My wife and I bought a TV from Target a few days ago and we’ve got 90 days to come back and get the $60 3 year extended warranty through Target that the salesman claimed was pretty hassle-free and covered basically everything, along with prepaid shipping and whatnot. I know that oftentimes these things are big ripoffs filled with hassles (Best Buy), but at other times they’re very good to have. For instance, I’ve always bought the Gamestop warranty on on my DS, and that has always been extremely easy to take advantage of (I don’t care a whole lot how I treat my DS since I know that I can get a brand new one every year for $20, cough).

So, what’s the consensus on these things?

I don’t know the answer to your question, but I had the exact same question about the Best Buy extended warranties, which you seem to know about. I had been thinking about getting a $100, 4-year extended warranty on a new TV… is this a bad idea? What kind of hassles are you talking about?

I bought a $1600 TV and had it die a month after the manufacturer warranty stopped covering it - about 13 months after purchase. My next TV, I sprung for the 5-year plan. I figure if I’m dropping that kind of cash I need it to last a while so I figured the replacement plan into the cost of the TV when I was shopping around.

Or just pick a better brand?

Make sure you read the fine print on any extended warranty before you buy it. Also some credit cards will double manufacturer warranties if you purchase it on the card.

Most finance experts agree that extended warranties are a scam, which is why the stores push them so hard. They make hardly any money on electronics sales but make huge money on the warranties.

Personally, I’ve broken down and bought extended warranties for a couple things I thought were crap hardware (PS2, 360) and never had a problem during the warranty period. The time I did have a DVD player go bad, it was still under the regular warranty.

The advice I’ve heard is that you’re better off taking the money you would’ve spent on the extended warranty in a savings account, because that’s basically all the warranty seller does. The difference is that after your two or three years are up, you still have the money.

Speaking in terms of pure financial EV, extended warranties are like all forms of non-essential insurance, which is to say they are a sucker’s bet and you should avoid them. If you like the peace of mind of knowing you’re covered, then go for it, but when considered over the long haul and over every big ticket purchase you make, unless you’re the unluckiest person alive or are one of those magnet people that kills all electronics, you’re almost certainly going to come out poorer in the long run if your policy is to get the extended coverage on all of your purchases.

As always, there are exceptions to the rule… like say the Xbox 360, but there usually aren’t too many items out there with such a known high defect rate that you’d want to buy despite the problems.

The extended warranties I’ve seen (specifically Best Buy and Future Shop in Canada) start counting their time the instant you buy it, but don’t take effect until the manufacturer’s warranty expires.

i.e. you buy a TV with a 1-year manufacturer’s warranty and a 2-year extended warranty. Your extended warranty is good for the next 2 years starting today, but in the first year the retailer will tell you to piss off and deal with the manufacturer.

If that doesn’t scream scam, I don’t know what else does.

I’m guessing this doesn’t apply to computers, too? Because the Dell XPS 1330 I bought in December’07 has had its LCD, motherboard, keyboard, processor and heatsink and wireless card replaced.

No. It isn’t.

Best Buy’s term of warranty will always exceed the manufacturer’s term of warranty otherwise they couldn’t sell it to you. They also handle the shipping and stuff. Whether or not it’s ‘worth it’ unfortunately requires being able to look into the future. If you do your homework (consumer reports, reviews) you should be able to determine if you need an extra warranty for whatever it is that you are buying. If it’s likely to break down, you may need one. Oh, and one thing…check to see if the warranty covers the TV bulb, many of them don’t. That will cost you about $150 if you fix it yourself (easy) or more if you send it in.

For example, it became clear early on that having an extended warranty for Xbox 360’s was really worth it because of RRoD’s. Now perhaps not so much.

I used to be a customer service manager at a couple Circuit City stores between 1992 and 1997. Customer service managers managed the repair/return department specifically. Basically I saw every item that came through be it for repairs or retrns/exchanges. I also has the daily pleasure of arguing with people about what the warranties do and do not cover – in short I know how these plans are valuable (or were as of 1997) and which ones aren’t worth the money.

Back in the day it was worth it to buy the ESP (extended service plan) for computers especially, because if the computer was over 12 months old there was a very small chance we woudl bother repairing it, since parts were typically not availible after that point. In these situations customers would bring in a busted 486dx they bought in 1994 for $2500 and get a store credit for that amount to apply to any new purchase, which typically ended up being a machine many times better than the old one.

The kicker was that abck then the warranties were not priced any different than the ESP’s sold for everything else in the store, this ended up costing them tons of amoney in the long run because CC always sold computer at 1-5% negative margin, because they made money on accesories. So any money spent either repairing or replacing was compltely lost since there was no profit to be made in the first place.

Aside from computers always being the number one thing you’d want to buy an ESP for there was one other category of items worth insuring: Anything with moving parts. It doesn’t matter if it was a cd player, a VCR, a cam-corder, a Laser Disc player, a washing machine, or a car radio with a tape deck. If it had moving parts we were much, much more likely to see these items return for repairs/exchanges.

Sure we had stuff like defective tv’s and telephones come back, but typically it was because buttons weren’t working, not because the unit just stopped working.

As a consumer I buy extended warranties on most items with moving parts, to this day, but I ignore them on stuff that doesn’t – and I make it a point to NEVER buy them on CRAP like CD-scratch warranties (give me a fucking break).

In the end it’s really important to consider what you are buying the warranty for: How it is used, how often it is expected to be used, and how much the warranty cost compared to the replacement cost of the item itself (or how soon such an item will be more or less obsolete – or when you will plan on replacing it anyway).

As for my opinion on Car warranties, it depends on the warranty and the dealer and the car itself. 90% of the extra warranties are crap for used vehicles, and the ones that aren’t can cost half as much as the car… You really have to be on your toes with these, because they generally are huge expensive scams.

I’ve bought several ans I now regret most of them:

  1. Honda CRV : 5 Year extended warranty: This was not 5 years, but 2 years beyond the 3 years of the actual warranty. These are reprsented like they are sold by the dealership, but they are instead sold by a 3rd party. The language was so specfic, that nothiing I ever needed done was covered. Also, it is very difficult to find a mechanic (other than the dealership…who was very cagey about it too) to honor it because they have a hard time getting paid.

  2. 5 Year Dryer Warranty: Forgot about it 4 years in, when it died. Duh!

  3. Kodak Digital Camera Warranty From Circuit City: Same as the experience above. Only usable after Manufacturer’s Warranty ended. Store would not honor it, even though it as represented as a store product (the warranty). Had to package and send unit myself, took too long, and was never really fixed (but it was cleaned! Thanks!)

  4. 3 Year Drop Replacement On HP Laptop: I used this after I spilled coffee on my HP. It worked geat and was honered directly by HP. Like stated above, comuter warranties seem to be worth it.

The only one I’ve ever purchased is for my various XBoxen as I knew they were going to break. Otherwise, they’re a waste of money, generally speaking.

They’re worth it to the retailer. To you, not so much.

If they weren’t a suckers bet then insurance companies wouldn’t offer them. Simple as that.

And it applies to computers too. If Dells average fault margin was as Jose experienced, they would be out of business. If you’re willing to comit fraud and intentionally break the computer before the warranty runs out, knowing they’ll replace it instead of repairing it, then it’s worth it - but then, everything is, if you’re willing to commit fraud (and can get away with it).

I’ve had good luck with Square Trade. Their warranties are MUCH cheaper than retailers’. They recently did a repair on my T-Mobile Dash - had it back to me in three days. While they had it, they replaced my aftermarket battery with an OEM one.

I ran the repair department of a local high-end electronics store for a couple of years back in the the earlier part of the decade, and when it comes to televisions and audio equipment at least, extended warranties are a total scam.

Like kerzain, most of my job was explaining to people that extended warranties don’t cover your son deciding to fire a hockey puck into the direct center of your brand-new CRT (true story, by the way - the puck was still embedded in the tube when he brought it in). The best were when they would bring in video cameras that still had the tape or disc from when the camera “stopped working” in it, because often the last thing recorded would be of the owner dropping the camera into a pool or whatever. (Also a true story.)

I once had a conversation with a woman who insisted that the lens in her video camera was malfunctioning. Why? Because she gave her camera to her 80 year old mother-in-law to film her daughter’s equestrian show. The tape was awesome - it was a couple of seconds of people riding horses, and then the camera’s view would swing to the ground because the mother-in-law’s arm would get tired or she would forget she was supposed to be filming stuff, or both. The mother-in-law, being apparently a bit of a bitch, insisted that she was pointing the cameras at the horses the entire time. So the customer then insisted that the lens must have been loose and pointing toward the ground, because why would her mother-in-law lie?

I’d go with kerzain here, it depends on circumstances. I live in the tropics, and what the humidity doesn’t kill the ants will get. Our stuff is forever dying after 1-2 years. We got so frustrated with things dying just outside of warranty that we’ve started getting EW on basically anything electronic. In the past six years it has definitely paid off. Let me see… four laptops, one TV, one monitor, two printers, one fax machine and my Honda have all benefitted from the EW on them. It helps that I’m in a place where this stuff has to be sent off to Sydney or Brisbane, because the EW pays for all that too and therefore makes it worthwhile. Oh, and I nearly forgot my digital camera that… um… well, it stopped working one day for ABSOLUTELY NO REASON! (please ignore the fact that I dropped it). Replaced in a week.

I paid for an extended warranty on my car and it worked for me. I did it because the GPS on my car is a large touch screen and I was afraid it would break down over time. What actually happened is that my ‘external’ amplifier went out (it’s called external because it’s external to the radio, not the car) and to replace it was more than the cost of the warranty.

Best Buy sells a warranty for computers that covers accidents, so in fact the above example would have been covered. Naturally that warranty costs more.

I’m with Coca Cola Zero on this one. An extended warranty is essentially insurance against the product going kablooie in the future when it is outside the manufacturer’s warranty. It’s a bet you are making against the warranty provider. You are betting that the future repair or replacement cost exceeds what you have paid for the extended warranty. The warranty provider is betting that the device holds up over the extended warranty period.