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.
Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.
While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.
–The Techdirt Team
Reader Comments
Subscribe: RSS
View by: Time | Thread
[ link to this | view in chronology ]
Never extend the warranty
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.
[ link to this | view in chronology ]
household appliances it sometimes make sense
[ link to this | view in chronology ]
rip-off is correct
Don't buy it.
[ link to this | view in chronology ]
Depends on the product
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.
[ link to this | view in chronology ]
WTF?
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.
[ link to this | view in chronology ]
Re: WTF?
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.
[ link to this | view in chronology ]
Warranty
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.
[ link to this | view in chronology ]
Warranties from Retailers
At least that was the case when I worked there six years ago.
[ link to this | view in chronology ]
Yes! Get the warranty
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.
[ link to this | view in chronology ]
Re: Yes! Get the warranty
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?
[ link to this | view in chronology ]
WARRANTY
[ link to this | view in chronology ]
It's the same
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
[ link to this | view in chronology ]
Extended Warranty
[ link to this | view in chronology ]
Re: Extended Warranty
[ link to this | view in chronology ]
Re: Extended Warranty
>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.
[ link to this | view in chronology ]
Re: Re: Extended Warranty
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.
[ link to this | view in chronology ]
Re: Re: Re: Extended Warranty
>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.
[ link to this | view in chronology ]
Agree
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.
[ link to this | view in chronology ]
Re: Agree
[ link to this | view in chronology ]
Re: Agree
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.
[ link to this | view in chronology ]
Re: Agree
How's that? It's my understanding that the "Circuit City Advantage Protection Plan" expires with the first claim. No continuing coverage for lemons.
Really? Isn't that fraudulent?
[ link to this | view in chronology ]
Warranties??? HA!!
[ link to this | view in chronology ]
Re: Warranties??? HA!!
[ link to this | view in chronology ]
BBE: See base of tin
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Need to get it straight.
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.
[ link to this | view in chronology ]
For a Projection TV it is worth it
[ link to this | view in chronology ]
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.
[ link to this | view in chronology ]
Shit in a box
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.
[ link to this | view in chronology ]
Extended warranty? Just say no, except...
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?
[ link to this | view in chronology ]
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.
[ link to this | view in chronology ]
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.
[ link to this | view in chronology ]
Only Laptops and only the manufacturer policy
[ link to this | view in chronology ]
warrenty work
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...
[ link to this | view in chronology ]
nintendo
[ link to this | view in chronology ]
Numbers game
[ link to this | view in chronology ]
computer warranties
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.
[ link to this | view in chronology ]
Some day you might be in that position, I'd really like to see you stick to the values you proclaim when that happens.
[ link to this | view in chronology ]
Re:
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.
[ link to this | view in chronology ]
[ link to this | view in chronology ]
[ link to this | view in chronology ]
[ link to this | view in chronology ]
HEY #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.
[ link to this | view in chronology ]
computer service plans
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.
[ link to this | view in chronology ]
Let's call is what it is..... Insurance
[ link to this | view in chronology ]
Extended Warranty - Some times it's a blessing
[ link to this | view in chronology ]
Why?
[ link to this | view in chronology ]
Agree...sort of
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.
[ link to this | view in chronology ]
50% Profit
[ link to this | view in chronology ]
It worked out OK for me
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.
[ link to this | view in chronology ]
I don't get them
Maybe I'm too lazy to waste money? hrmm...
[ link to this | view in chronology ]
Macs
[ link to this | view in chronology ]
give me a break
[ link to this | view in chronology ]
i think you've got something backwards
[ link to this | view in chronology ]
[ link to this | view in chronology ]
so let me get this right
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
[ link to this | view in chronology ]
Re: so let me get this right
[ link to this | view in chronology ]
Open a book.
[ link to this | view in chronology ]
WRONG
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.
[ link to this | view in chronology ]
paragraphs
[ link to this | view in chronology ]
Ok... Reply to #54
[ link to this | view in chronology ]
think about it
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.
[ link to this | view in chronology ]
I think they are good for some items, but not all
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.
[ link to this | view in chronology ]
Re: I think they are good for some items, but not
[ link to this | view in chronology ]
Get the Service Agreement, not Extended Warranties
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?
[ link to this | view in chronology ]
Accidental Coverage
[ link to this | view in chronology ]
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Re:
[ link to this | view in chronology ]
Mike, clean it up!
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.
[ link to this | view in chronology ]
Re: Mike, clean it up!
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.
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.
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.
No, it doesn't. Implied warranties and manufacturer's are _not_ the same. Read what I wrote above.
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.
[ link to this | view in chronology ]
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.
[ link to this | view in chronology ]
WARRENTY
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
[ link to this | view in chronology ]
Not Everything is an
[ link to this | view in chronology ]
Very Special Cases
[ link to this | view in chronology ]
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...
[ link to this | view in chronology ]
Extended Warrenties Not All Bad
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.
[ link to this | view in chronology ]
Warranties are made for a reason...
[ link to this | view in chronology ]
Re: Warranties are made for a reason...
Wil
[ link to this | view in chronology ]
This article...
[ link to this | view in chronology ]