Should people buy extended warranties? (stores, deal, expensive, purchase)

[smoky_topaz]

I'm a representative for the Home Shopping Network working from home part time. One trend I'm noticing is the need to offer extended warranties for x amount of dollars...it can be between 9.95 and 125.00 depending on what the item is. The term for the extended warranty, which HSN calls the "Protection Plus Plan" is good for two years after the original warranty expires after 1 year. Mostly the extended warranties involve electronics and jewelry. I see a lot of customers turn it down, although a few take the bait. The extended warranty covers "accidental damage" apparently.

Who on this board endorses extended warranties on consumer goods?

[nitram]

extened warranties ~ good or bad buys?

Have you read this thread ^^ before yours?

[azriverfan.]

It depends on the item. Just ask yourself this question

1. Where is the product fixed. Do you have to mail it yourself or can you bring it into a store? If you have to mail it yourself, then it's not worth it.

2. How long do you intend to keep the product

3. How much will it cost to replace the product at a time when the product goes bad?

4. Will you want to replace the product when it does go bad?

Most of the time, I would say no but for example with Apple products, I have bought the Apple Care plan and it's been amazing and paid for itself three times over.

[chuck_steak]

I bought an expensive one once for a large TV purchased at a major store once. It was for three years. Then the company went out of business! The TV fizzled out and I had no recourse either. I'll never do that again.

[vmaxnc]

Originally Posted by chuck_steak

I bought an expensive one once for a large TV purchased at a major store once. It was for three years. Then the company went out of business! The TV fizzled out and I had no recourse either. I'll never do that again.

Which company went out of business? The seller, or the warranty company? In my 25+ years in the A/V industry, warranties were sold through an external company, so if the retailer went under, the warranty was still in effect. YMMV.

[chitown noob]

Rule #1: All companies exist to make money

Rule #2: Companies are not going to do things that cause them to lose money

Rule #3: Anything a company offers you is designed for them to make money

Extended warranties are based on statistical calculations of failure rates vs. cost.

They exist for the company to make money. Statistically speaking, the product will not fail. (of course, if it does, you'll be happy you have the warranty).

Another similar product are those "absolute return" funds that some investment companies offer where they say if the S&P or whatever goes anywhere between -10% and +10%, you get the absolute return of the gains (so if it goes down 5% you still get +5%, etc.) but if it goes outside of those bounds you don't get any return (or whatever the specific rules are).

People see those and think "holy crap, how can I lose?!"

What they don't realize is that quants and computers who do more math in 5 seconds than you do in your entire lifetime have come up with those parameters as being likely to be profitable for the investment company.

Companies don't make money by paying you positive gains when your investments go down (not talking about hedge funds that take short positions here).

Companies don't make money by replacing your products for free.

I believe with one or two exceptions (for specific new technology products), extended warranties are always a bad deal. Sure, statistically speaking the product might fail, but the money you save by not buying extended warranties for everything will more than make up the cost for you buying a new one.

[cb at sea]

I figure that the manufacturer's warranty that COMES with the product is sufficient....generally, if your product is "defective", that will show up within the 1st year..... and the manufacturer will take care of it!

[EthanJoushu]

An extended warranty may be sold under a product name but what is important is the identity of the entity that is financially responsible for the payment of warranty claims; it is that entity that has to be license.

[TechGromit]

Originally Posted by smoky_topaz

Who on this board endorses extended warranties on consumer goods?

I certainly don't, 95% of the time the product outlasts the extended warranty. Extended warranties are almost pure profit for the stores. I remember buying a gun safe and being asked if I wanted an extended warranty for it. I told the cashier it's just a metal box, what could possibly go wrong with it?

My father did buy a digital camera with an extended warranty and when he started having trouble with it, they sent him the newer camera since they didn't make the older model anymore. But as a rule of thumb, I always turn down the extended warranties, the factory warranty is fine for me.