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The Consumerist On Warranties
By JLP | July 18, 2007
I saw over on the Consumerist that Best Buy reported a 12% decrease in extended warranty revenue. That’s gotta hurt because extended warranties are almost all profit (except for the commission to the person who sold the warranty).
Anyway, that post reminded me of the time I was standing in line at Best Buy, waiting to get checked out. The lady in front of me was buying a radar detector. Her total came to something like $53. The cashier asked her if she would like the extended warranty on her radar detector and then went on to explain the benefits of it. The lady looked confused and looked at me. I shook my head no and the lady then told the cashier “no thanks.”
You should have seen the look on that cashier’s face! LOL! It was classic! After the lady left and it was my turn in line, the cashier asked me why I stuck my nose in that lady’s business. I told her that the lady looked at me for approval and I couldn’t justify telling her to pay for a warranty on a relatively inexpensive product like a radar detector. She didn’t say anything and I paid for my purchase and left.
One thing I have always kept in mind over the years is that if a store is telling me how great something like a warranty is, it is probably great for them, not me. Therefore, I just say no.
Do you have an extended warranty story you’d like to share?
Topics: Miscellaneous | 14 Comments »
July 18th, 2007 at 4:10 pm
The only extended warranty I ever bought was for a $450 digital video camera. It was a 4 year extended warranty for $80. Nothing went wrong with my camera over the period, but, if it had, the minimum charge for repair would have been $60. I considered it a fair deal.
July 18th, 2007 at 4:42 pm
My wife wanted an extended warranty for our big screen TV (not purchased at Best Buy). It didn’t interest me, but I went along with her. One good thing is that after 5 years, if you don’t use the warranty, they refund part of the price. If you remember after 5 years, that is.
July 18th, 2007 at 4:50 pm
Sam said:
“One good thing is that after 5 years, if you don’t use the warranty, they refund part of the price. If you remember after 5 years, that is.”
That’s the key – remembering. I wonder how many extended warranties go unused because the buyers forget about them? That’s why it is good to have some sort of filing system.
July 18th, 2007 at 5:36 pm
My wife works in the jewelery department or a large department store, and for someone who’s generally completely against extended warranties, I have to say their extended warranty on jewelery seems like a pretty good deal. I don’t wear jewelery so I don’t know how often stones fall out and stuff, but I do know I can tear up a watch face pretty quickly and they cover that. She also had a pair of ear rings that she sent in and came back either a brand new pair or extremely well repaired and cleaned.
July 18th, 2007 at 6:52 pm
I work in the Electronic Retail industry and am asked to sell these things (not for BestBuy but one of their competitors) Its true, the warranties are written off as about 60% margin, but in reality they are more than that. The only time I honestly suggest buying them is if it is a REPLACEMENT plan, not a repair plan, and the item is over $100. Repair Plans on TVs are good as long as they include bulb replacement, which many wont. Laptop repair plans that include screen repair is a toss up. If it covers software issues as well as physical/accidental damage (including the screen), then yes, otherwise I probably wouldn’t do it. for desktops, don’t bother. and if you get the replacement plan, use it, at the end of the plan go replace the product, make up a reason if nothing is wrong with it. get a new product and call it a day.
July 18th, 2007 at 7:23 pm
Just FYI – Best Buy doesn’t pay its sales people commissions. And when I started at BBY in 1997, they counted warranties as either 60 or 70% profit, but shortly after I started, and they continued this until I quit in 2001, they started counting the “true” profit… which was almost always 90%+.
July 18th, 2007 at 9:42 pm
I used to sell those extended warranties (not at Best Buy though). At my store, commissioned salespeople 1) got a bonus based on extended warranty sales and 2) got penalized (generally lost hours, but sometimes fired) for not selling a minimum amount.
What you might not know is that the warrantee service is generally poor. There’s little financial incentive for the store to get it right, you’ve already paid.
(Also, nowadays many credit cards will extend manufacturers warrantees anyway.)
July 18th, 2007 at 11:36 pm
I usually buy the warranties; they’ve saved me from shitty products in the past. When my ipod battery died after a couple of years, they said they couldn’t replace it because apple no longer produced that model, so they upgraded me from a 60g gen 4 to an 80gb ipod video free.
I bought a stove from best buy, and the control unit on the thing wouldn’t quit freaking out; they replaced it four times then they replaced the whole stove. again, i got an upgraded model for free (minus the cost of the warranty) and my stove issues are gone.
My hdtv projection tv also bought at best buy had something go out on it and the color went all wonky. there was one month left on the 4 year warranty. again, the tv was discontinued by the manufacturer so they upgraded me to a new DLP tv.
they upgrade you based on the specs and price of the item you warrantied, then, when if they replace it, they will give you a similar item with the same or better specs for the same or cheaper price.
i’m very happy i bought those warranties. most of the warranties i buy never get used, but those that do pay for those that don’t.
i do not work for best buy, circuit city, or any electronics store; i’m a joe blow consumer.
July 19th, 2007 at 7:24 am
My extended warranty stories all end with me spending money on something that I didn’t need. I purchased an extended warranty with a laptop once and it turned out I didn’t need it which is a good thing. That was the one and only time I felt it was a good idea to purchase it since I was buying a demo model that people had been using and abusing.
Now that I look back, even that situation it wasn’t needed. I’ve learned my lessons when it comes to extended warranties – they’re a cash grab.
July 19th, 2007 at 10:58 am
Insurance is insurance. You never want to use it. On any item, Life, Hhealth, auto, home, consumer products – only insure what you can’t afford to replace yourself. Take as high a deductible as you can afford to pay, look for quality products. On a purely non-necessary item you can get along without, I would question the need for a service plan unless there was a propensity for early failure in the entire range of that particular product.
July 19th, 2007 at 11:02 am
Yu,
I actually thought about using your quote in my post.
July 19th, 2007 at 1:20 pm
I was just going to post exactly what yu did. As a general rule I only insure what I can’t reasonably afford to replace myself. Insurance is a huge industry because a large chunk of the premium you pay goes to profit. This profit is fair if they are providing a valuable service such as insuring your house which would be destructive if it were lost. But if I can go out and replace a $99 item without any hardship there is no sense in me paying someone to cover that risk of loss. Jeremiah would be much better off taking the money he spends on extended warranties whenever he buys something and instead putting it in a savings account. He can then dip into the account when necessary. This would essentially be self-insurance and a lot cheaper than paying some insurance company to basically do the same thing for you.
July 19th, 2007 at 8:35 pm
The Only Extended Warranty i’ve ever dealt with were “Service Contracts” that were “pushed” when i would buy a car. I have only ever purchased one, it did pay for itself, BUT at the same time, if i had known i was going to have as much trouble with that car (it was an old rental car) i would have never bought it to start with.
The biggest problem i had with the “warranty” was it mostly covered only things that seldom would fail.. most common repair items (even expensive ones) were not covered under the warranty. Often the contract terms would be very vague and i wouldnt find out it was NON covered until AFTER i authorized the repair.. (which lead to major debt)
The biggest thing that irks me most about car extended warranties, especially when financing the car, is the Lie Nance Manager tells you the warranty is REQUIRED to be approved for the loan… (found out AFTER the fact this is illegal)..
Never buy an extended warranty.. all it does is make the item COST more. and MANY times, a warranty’s cost is a significant percentage of the original items cost (ie a computer monitor my dad bought at Best Buy for 199 bucks.. for 125 bucks he could buy a 3 year warranty… what is the point.. for another 75 bucks he could just buy a new one and not have to jump thru the warranty companies “loops”
October 27th, 2010 at 12:46 pm
LCD monitors are the de factor standard these days because they do not consume too much electricity,:.