Are retailer extended warranties worth it?

I think you need to ask a followup question: Assuming that you buy the warranty and something then happens to the item that the warranty should cover, will the store:

a) Still be around
b) Actually repair the item

Given the economy I think the answer to a) is “uncertain” and given Consumerist stories I’d say the answer to b) is also “uncertain”

I think the extended warranty might make sense in certain rare circumstances (I would have purchased one on my iPhone if they offered it, which they didn’t because they knew the hardware was flighty)

I would never in a million years buy a warranty from most big box electronics stores though because I don’t trust them to honor it.

Spoofy, they have to follow the warranty. Big Box stores are actually a lot more likely to repair the item because they have a lot more to lose if they don’t repair it. BB has gotten in trouble with states before about this, so if they don’t repair your item, report them to the state attorney general. On the other hand, don’t be a dick and expect them to do repairs when the item is out of their warranty period, the repair is due to abuse (and you don’t have accident coverage) or you’ve switched items and expect them to repair your 13 year old TV.

There’s little evidence that BB won’t be around, particularly with the CC bankruptcy. And naturally don’t buy a 20 year warranty from anyone but that’s just common sense.

Of course there’s outlier case, which is why insurers is forever dreaming up exemptions to the policy - like no theft insurance in high risk neighbourhoods and no motorbike insurance if you drive in the winter (here, not Australia obviously).

The only reason you get away with this is because your case is too little to warrant rewriting the entire policy - if it was a running policy and not just a number of new policies, the company would most likely pay up once or twice and then inform you, that they had no further interest in doing business with you.

If enough people benefits from a policy it will be rewritten or prices will go up. Otherwise insurance wouldn’t be such a great way to make money.

Despite the general consensus that Extended WArranties are scams, it really isn’t a cut and dried “Yes”/“No” answer.

Consumer Reports and other consumer friendly organizations will tell you that extended warranties need to be judged on a case by case basis. A lot of times they’re pointless. For example, if you buy a DVD player that’s $80 and they offer a $15 warranty that extends the 90-day manufacturer’s warranty out to a year, then it’s worthless. Chances are the thing is either going to be DOA (in which case you’re covered under the 90-day one) or it’ll work fine for years (and you’ve wasted your $15). On the other hand, should you purchase a new TV for $1500 that comes with a one-year warranty, then you’re offered an additional 2 years for $75 more, it may be adviseable to take that warranty. While it won’t cover hockey pucks through the screen, it will cover any mechanical issue with the TV that occurs during normal use, and that could save you dropping hundreds in repair costs in 18 months should a tuner go bad or the screen develop problems.

In addition to the cost analysis factor, keep in mind that many credit card companies will double a manufacturers warranty if you pay using your card. This can give you an “extended warranty” absolutely free, and is a great way to get extra protection for electronics (just make sure you save your receipt!). It’s important to save copies of everything (file them away in a folder somewhere along with all your bills, taxes and whatnot) because 18 months from now you’re never going to remember what the warranty covered, who to contact, or even what you did with the receipt. If it’s all together somewhere in a folder, your job is easy when something breaks.

In the end it boils down to risk analysis. Do you personally believe there is a good chance that the item you’re purchasing might not last as long as you need it to, and would replacing/repairing it 18 months from now cost significantly more than you would want to pay to do so? If that’s the case, and you’re not getting free extended coverage from a credit card company or some other third party, then buying a moderately priced extended warranty insurance policy might be the right call. Examine the policy carefully before buying, make sure it covers all defects in the product and allows for a no-cost replacement (free shipping included), then decide. Most retailers give you the policy and let you have 60-90 days to decide, so there’s no rush at the register to make the decision.

Forget it, Lorini. It’s Spoofytown.

I pretty much stopped going to the local game retailer (Game Crazy) for new games and instead go to Best Buy, because they hock all kinds of warranties, memberships, preorder pitches and other crap when I bought a game. They are in the same shopping complex and the Best Buy just gives me the game.

They want to pitch you $3 for a scatch warranty? No thanks. It’s especially irritating when they do it for a used game. I always ask them … “But you do have a return policy if this one is scratched and unplayable, right?” “Oh yeah, 30 days.” “No thanks then”

I would totally trust US Fidelis. Totally. Oh yeah. In spite of all the complaints.

Basically 3 factors when judging extended warranties:
(A) How likely is something to fail within the warranty?
(B) How much in repair or replacement costs will the warranty save?
© How likely are you to want to upgrade rather than simply replace the item if and when it dies?

Just a few personal examples:

Xbox 360 (summer 2006): bought the 2-year extended warranty from MS after all the early horror stories about 360 failure rates. Not only have I not had any problems with my 360 (knock on wood), but of course MS offered the 3-year RRoD warranty on all 360s. So naturally, I’m expecting mine to die in the fall, at which point I’ll either get a cheap refurb or upgrade to a 120GB model. By comparison, a friend’s 360, bought after mine, RRoDed within a year of purchase; fortunately, it was after MS added the 3-year warranty and they took care of him without any hassles.

Car radio (fall 2003): bought the 3-year warranty from Circuit City. Had trouble with it 2 1/2 years later. Took it back to CC, they sent it in for repairs (leaving me sans tunes in my car), couple weeks later they declared it a lost cause. But rather than giving me a new radio, they instead gave me a prorated store credit. I ended up getting back more than the warranty cost, so technically I came out ahead. But considering how long I was without a radio in my car before getting my store credit, I think I would’ve preferred to skip the warranty, swallow the extra cost, and just buy a new radio when that one died.

Hard drive: bought a pair of Western Digital 250GB HDDs several years ago. This was back when WD’s entry-level HDDs only came with a 1-year warranty and you had to pay extra for 3 years. I paid for the 3-year warranty on the first HD but not the second; so naturally, it was the latter which died in the 1-to-3 year timeframe. Had to buy a new one, but since HD capacities and speeds go up all the time, it ended up being a nice (if unplanned and ill-timed) upgrade.

You really can’t trust it when people tell you that their extended warranties are hassle free. They’re encouraged to say that. For the most part, warranties are pure profit for places like Best Buy and Target. So just like the warranties GameStop offers on games, there are big incentives to sell them like crazy. I have no idea how good Target’s is. When my ex bought a new TV to replace the one I took, she made certain to get the warranty. My favorite part of the process was that when she asked for the warranty, she was told that they were out of stock. Out of stock of warranties*. That’s great.

*Their warranties are actually cards you buy that have codes on them. So it’s possible to be out of stock. It’s still stupid, though. A warranty is just a promise. You can’t be out of stock of promises, damn it. It’s like being out of stock of good wishes or happy thoughts.

Unfortunately we don’t have access to this information. The people that do are the people offering the warrenty. For them its an easy deal. Multiply the failure rate by the average cost to repair, double that price and offer it to your customers.

If your hope is that they have messed up and offer it for less than the average cost then I think you will be disappointed. Extended warranties aren’t worth it.

The only extended warranty I have ever bought was for my car. It costs $1500, covers everything for 6 years and at the end of the 6 years they give back any portion of the $1500 that I haven’t used.

Thanks for the input, everyone. I think we’ll skip on the warranty. If I knew it would be as easy as the Gamestop warranty (me: It’s broken. drone: ok, here’s a new one) I’d go for it, but I just don’t see that happening.

Obviously, extended warranties are profit generators for those that sell them. The question is, what’re the odds you’ll be one of the customers who benefits from coverage, rather than one of the many who get nothing from them?

Consumer Reports provides reliability data on various goods like cars, TV, computers, etc. They compare different brands and - in the case of TVs - different technologies (FYI, LCDs are the most reliable, DLP RPTVs are the least). So that provides at least some frame of reference.

I think Slainte Math’s analysis is pretty accurate. I would never buy an EW on a car because I’ve seen people screwed on them several times, but for big ticket electronics I do. If you are in a financial situation where you can absorb the cost of replacing a $500+ TV then you don’t need them, but if it is going to be a problem if the TV dies then a reasonably priced EW is worth it. Especially when you consider that any TV repair bill is going to start at $100 and move up from there.

Also, some EWs cover some things that you wouldn’t think would be covered. For example, WalMart’s EW’s on electronics cover surge damage (though how you would prove that I don’t know). As someone who has had electronics damaged by surges, that’s not a bad extra.

Paying for a warranty is almost never worth it. The cheaper the thing, the more this is true, because your risk-aversion will be lower for lower costs. Are you seriously going to pay a significant chunk of the list price to defray repairs on something that likely won’t break anyway? Come on. The sheer eagerness of a typical clerk to sell you the damn thing should make the reality obvious enough without having to go through any analysis. But yeah, basically, this is the worst kind of insurance. Like travel insurance, it’s based not only on uncertainty, but on the consumer’s lack of understanding of uncertainty.

So if you are going to go through dozens or hundreds of consumer purchases over your lifetime that may have extended warranties, it will be infinitely cheaper to self-insure and just buy replacements in the rare event something breaks down on its own. And don’t forget you have to invest in keeping track of the warranties, the paperwork in filing the claim, the packaging and shipping, and these days, you have to worry about the continued existence of the vendor… Really along with the excessive price, it’s just not a good idea except perhaps in certain very rare cases where you have a very specialized and reasoned high level of risk aversion.

The best thing to do is use a credit card automatic extended warranty to double most standard 1-year warranties into 2-year warranties. It’s essentially free, and all the CC company will want is the original receipt of purchase, a copy of the statement showing you bought it with their card, the manufacturer’s warranty details (they cover anything the manufacturer covered) and the repair/replacement bill so they know how much money to credit back to you. They really don’t typically care that much about the details of any claim you make (they cover just about any product that can be purchased, so their folks aren’t really specialists, especially on electronics) as long as you can produce the documents so they can check them off their list.

I go out of my way to buy all big ticket items this way. So far I actually had a Scooba die about 20 months after purchase and the replacement cost was covered by my CC company.