Sunday, May 5, 2013

Extended Warranties, Are They Worth It?

Retailers offer extended warranties on almost everything these days, but are they worth investing in?

For me, it depends on a combination of things; the deal being offered and the repair/replacement costs of the product. Black and Decker cordless screwdriver? No thanks, I’ll just buy a new one. It gets a little more complicated with higher end items, though.

It’s the devices that you’re likely to repair as opposed to replace that you might want the coverage on, especially if it covers you against accidental damage, e.g., dropping, spills, etc. and also covers consumables like battery replacement.

With TV’s, I usually balk. Most have a one year factory warranty, there’s no batteries or accessories to replace, and they’re not subject to a lot of wear and tear like a laptop or tablet, just mount them and forget them. Plus with the way the prices keep dropping, they’re more of a replace than repair device these days.

PC’s, laptops and tablets are similar in the fact that prices keep dropping; wait a year and you can buy twice the system for the same money, but they’re expensive to fix, and your first choice is always repair with this type of device. It’s a pain to move all your data to a new machine, near impossible if you haven’t been doing backups.

I purchased extended warranties on both my desktop and laptop, and both paid off big time. The power supply and motherboard on my desktop fried after taking a power jolt with only a couple of weeks left on the plan, and Best Buy fixed it with no questions asked, basically giving me back a brand new computer with my original hard drive.

I had purchased the same Best Buy extended warranty on my laptop, and once again with only weeks left on the plan I began having overheating issues with the video card. Because the video card was integrated with the motherboard, the laptop was deemed too costly to repair, so Best Buy gave me a gift card for the purchase price of a similar model plus tax, and I walked out of there with a brand new laptop. One with twice the processing power, memory and disk capacity, and a larger screen, no less. Nice.

I had also gotten a replacement battery for the laptop shortly before its demise, no questions asked. I just had to show my sales slip and warranty paperwork and they shipped a replacement to my house free of charge. Think about this; if a warranty covers battery replacement, you know you’re going to recoup most of the cost by ordering a battery before the warranty expires, they go for about $100, and what 2 or 3 year old laptop couldn’t use a new battery?

So, before saying yes or no to the extended warranty offer, here’s what I ask myself:

Would I want to get this product repaired?

Is it an “at risk” device, something that will see a lot of wear and tear like a laptop?

Does it cover things that are not covered by the factory warranty, e.g. power spikes, spills, drops?

Is the extended warranty for a longer period than the factory warranty, and is it a reasonable cost?

Consumer Reports warns against buying any extended warranties or purchase protection plans, saying that the odds are that most of the devices they are offered on will either never need repair, or the problems will surface during the original manufacturer’s warranty, however they do admit that the exception to the rule would be laptops, especially Macs, due to Apple’s skimpy warranty policies. They offer a chart (shown above) with average failure rates of products within the first 3 to 4 years that shows laptop failure rates at 43%, leading all electronics, appliances and yard equipment by a wide margin.

Personally, I think the Consumer Reports article is a little misleading. They come out so strongly against extended warranties, then halfway through the article backtrack when it comes to electronics. In my opinion, most people stop reading after the first few negative paragraphs and miss the important caveats. I do have to thank them for the failure rate chart, though. Very nice.

Bottom line, the choice is yours. Weigh your options and make the choice that’s right for you, and your budget.

That is all.