Consumer Reports: Extended Warranties Are Evil

Mon Feb 4, 2008 1:47PM EST

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I've railed against extended warranties for years now, but my data has always been empirical: I've bought them in the past, but I can recall no cases where I actually used the warranty. I stopped buying them years ago for just that reason and have never regretted it. I just pay for repairs as I need them.

But leave it to Consumer Reports to inject some science into the matter. In a November story that I only just now discovered, the magazine reports that extended warranties will almost all be "money down the drain." Here's why:

  • Many repairs will be covered by the standard warranty. (In my experience, the most common problems occur before ever unboxing the product; they don't suddenly materialize years later.)
  • When products do break down, it's typically after your extended warranty has expired.
  • Want to get something repaired? It will cost about the same as buying an extended warranty in the first place.

And new data shows that extended warranties are becoming an even worse investment.

On even trouble-prone rear-projection TVs, the odds that you'll need to repair one in its first few years of use are only 1 in 10. And newer, flat-panel TVs show a repair rate of only 3 percent.

What about laptops? With a 43 percent repair rate within four years, they're the most trouble-prone of all consumer products that Consumer Reports tracks.

The reasons are obvious, considering the physical beating that most laptops take. But extended warranties don't cover accidental damage; you'll have to buy an accidental damage protection plan and an extended warranty to cover drops, to the tune of up to $400 up front.

That's nice if you're a butterfingers, but few people with a four-year-old laptop will want to bother repairing it, as new technology will be much more enticing at that point.

Extended warranties have saved a very few people a whole lot of money from time to time... and everyone has at least one failed device horror story to tell. That's why these warranties are so popular.

But most people will never use them at all. If you're not convinced, ask yourself why the profit margin on extended warranties is a full 50 percent, vs. less than 10 percent for the actual products. Sounds like a scam to me.

LINK: Why you don't need an extended warranty 

Comments on Consumer Reports: Extended Warranties Are Evil

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  • 6 Posted by commorancy on Thu Sep 3, 2009 3:28PM EDT Report Abuse

    I do buy extended warranties, but only on certain electronics. I don't do it on items like most of what you mentioned. It also depends on the terms of the warranty. For example, a standard warranty requires you to send the item off via mail. If you buy a store extended warranty, you can usually take it to the store directly (more convenient). But, you have to read the terms. Some extended warranties allow an immediate exchange rather than waiting for it to be fixed. So, these end up more as an extended return policy (which is the best deal). When I buy notebook computers, I always get the accident policy (the policy that allows for repair/replacement of any damage for any reason). This is also the best policy to get for notebooks and portable devices. If you drop it and the screen breaks, just take it back and get a new one. These are worth it. It is, however, not worth getting an extended warranty on a device that is not portable nor prone to having accidents. If you have kids, though, the accident policies are well worth it. No telling what you might find inside your DVD player's door.

  • 7 Posted by larmo33 on Thu Sep 3, 2009 4:56PM EDT Report Abuse

    All of the posts have been extremely intelligent. Commorancy's thoughts are particuarly valid. My short story is about the Gateway extended warranty that I purchased with my computer and moniter. After about two years. The monitor failed, and Gateway exchanged it, (without a problem), with a "refurbished" monitor. Which to my knowledge is still functioning for a friend that I gave it to as a gift. I think that Radio Shack has a good rep for exchanging warranted merchandise with new or better versions of the given item. My final concern is the X-box. It is my understanding that Microsoft has extended the warranty to three years. The problem is. When I registered on line during the Christmas holiday season. I was told that my warranty is only good into the Summer of 2008. WTF! ;-)

  • 8 Posted by agustin2489 on Thu Sep 3, 2009 2:47PM EDT Report Abuse

    I'd have to agree with Consumer Reports. It follows a common line of logic.

  • 9 Posted by amyrach8282 on Thu Sep 3, 2009 2:53PM EDT Report Abuse

    Good article. I agree that you only need an extended warranty on more expensive purchases. I bought one for my car and I did actually use it! It would've cost me $4000 to fix, but the EW that I bought only cost me a $1000. So in that case, I am glad that I purchased it. In most cases, I would agree that you don't need it.

  • 10 Posted by bannedfromteal on Thu Sep 3, 2009 3:02PM EDT Report Abuse

    Don't do it.Problem with extended warranties is that the company who has the warranty could bite the dust either before or after the warranty expires.It happen to me twice.

  • 11 Posted by somogyi_1 on Thu Sep 3, 2009 9:32PM EDT Report Abuse

    Here's my experience (and science for that matter) 2002 - pioneer cd recorder ~$1000 broke after 14 months - out of warranty - $285 to fix. broke again 6 months later. 2004- marantz pro cd recorder ~850 broke after 16 month - out of warranty - $230 to fix. still works now. 2007- stanton dual cd player $200 plus $20 for 3 year warranty. There's a whole $20 "down the tubes" Bad decision, right?

  • 12 Posted by testing321123 on Thu Sep 3, 2009 10:01PM EDT Report Abuse

    On laptops, just going with a 1 year Warranty is Russian Roulette. I am a Director of PC Support for a law school and I do not have enough fingers and toes to count hown many students' laptops have broken after their 1 year warranty was up (LCD went bad or motherboard needed to be replaced, all which would have been covered under a standard 3 yr warranty). The cost of these fixes is almost half the price of the laptop (or more sometimes), so it is new laptop time if it is out of warranty. Now I do agree that the accident protection can be extremely costly and probably is not necessary. But in our setting, we do have a ton of spills (60 students with laptops and beverages in the same room, you get spills...lol). We get a 3 year spill/accident protection on our IBM's for $60..no brainer, but the average single consumer usually pays $200 or more for the same.

  • 13 Posted by bassist01 on Thu Sep 3, 2009 3:02PM EDT Report Abuse

    Working for a major retailer i've seen some stuff happen more often than it should. I don't buy big screen tv's and high end electronic equipment. But again i've seen what really happens to these types of items. As for laptops, majority of the break downs become user error. Some manufactures charge you for over the phone tech support. As for tv's, depending where you are located, the shipping is more for a flat panel tv than it is to fix it. I correct myself. My 42 inch projection tv, which I bought on a clearance sale will have to be shipped to upstate New York or Atlanta. When you include the insurance and the box to ship it in thats getting close to $400 and it's under the mfg warranty. If you have the money to replace it within a year to two? Don't buy the warranty just buy a new one. But if this item is a big hit on your wallet? You might want to protect your investment

  • 14 Posted by stonnacliff on Thu Sep 3, 2009 9:45PM EDT Report Abuse

    I have always had good luck with extended warranty's. The key is to make sure you know what you are buying and what they cover. About 7 years ago, I bought a laptop at Best Buy and of course purchased their 3 year PSP that stated that if you have to have your laptop sent out for repair 3 times, on the 4th send-off, they replace the unit. Just shy of 3 years later, I had my fourth repair (the first was a usb port issue, the second was for the internal power supply, the third and fourth were also for usb port issues.) They replaced it with a brand new machine from the shelf. Again, I purchased a PSP on the new machine and yet again, just shy of 3 years later, they had to replace it again. The key is knowing what the plan covers and making sure you get full value. I have had several batteries replaced under their plan as well as chargers/ac adapters. In my opinion,....full value was received.

  • 15 Posted by azlakey on Thu Sep 3, 2009 3:00PM EDT Report Abuse

    I usually don't buy extended warranties, but on occasion, I've bought factory refurbished electronics at Fry's electronics and since the price of the ew is based on the cost of the purchased item, it's usually very reasonable. I had a digital camera replaced after only spending $19.99 for the ew, same thing with an all in one printer. However, I just took my laptop in on its ew and they tried to charge me $100. "diagnostic fee" until I raised heck

  • 16 Posted by richardhsu7 on Thu Sep 3, 2009 8:40PM EDT Report Abuse

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  • 17 Posted by rebelgal1114 on Thu Sep 3, 2009 8:33PM EDT Report Abuse

    I bought an AppleCare plan for my iBook a few years ago. They replaced two keyboards, a screen, and two motherboards. When they saw that the motherboards kept failing, they replaced my iBook with a new MacBook. That extended warranty was worth every penny -- but only because it covered accidental damage.

  • 18 Posted by carrielarison on Thu Sep 3, 2009 3:19PM EDT Report Abuse

    I have never used an extended warranty, and I have purchased them on almost every electronic I have bought. So, when my TV went out 2 weeks ago, thankfully I had just read the original piece. I decided to purchase a 50" plasma to replace my old TV. The sales people asked me on 3 separate occassions to buy the warranty, stating how may problems I would have with the TV. I spoke with a friend who sells them and he said that by the time these items make themselves evident, I will want to buy new anyway. I finally told the sales person that maybe I shouldn't buy the TV after all if it is going to have so many problems--it must be a real piece of crap. That shut them up. PS, even on my laptop-and I am rough on it--I never used it.

  • 19 Posted by sharongerontis on Thu Sep 3, 2009 9:17PM EDT Report Abuse

    I have personnaly paid for extra warranties on my vehicles for years. Why?. Because I drive approximately 80 miles per day.There hasn't been a time yet that I haven't used one. Perhaps I am just an unlucky person. All I know is that they work for me.

  • 20 Posted by rthr_potter on Thu Sep 3, 2009 8:55PM EDT Report Abuse

    well sure, but- well you know,so on the other hand, I think-you know, its probley like, well you know

  • 21 Posted by shareef777 on Thu Sep 3, 2009 9:16PM EDT Report Abuse

    Never bothered with warranties. I usually get my laptop replaced after a year and half. Don't keep it long enough to use the warranty.

  • 22 Posted by scotsinkilts on Thu Sep 3, 2009 9:08PM EDT Report Abuse

    I seem to have the worst luck with laptops. Mines in for repairs several times (making it worth the price I paid for the warrenty). My DVD drive twice, my mouse broke (and that had to be sent back because it wasn't fixed the first time), then my screen died along with a loose key. It was barely a year old. Believe me, I find the warrenty to be worth it. I'd rather pay 400 now than have the computer break and pay 500 to fix it.

  • 23 Posted by jfpiggy on Thu Sep 3, 2009 4:34PM EDT Report Abuse

    That Xbox warranty is a 1 year warranty on everything except the RRoD issue, which is 3 years. So if your dvd drive breaks in it after a year and a half, you have to call and say you have the RRoD to get it fixed for free.

  • 24 Posted by ahk06032 on Thu Sep 3, 2009 2:47PM EDT Report Abuse

    With all due respect to the author of this article, I COMPLETELY DISAGREE, for a few of the following reason(s). Yesterday, Microsoft returned my son's XBOX 360 following a second repair. This time around, they even paid for overnite shipping each way and I know this has cost them a bit (well over $300). I had only paid $40 for the warranty at Sam's Club (part of Wal-Mart). My daughter (in college) accidentally dropped her Dell laptop about two weeks into college and this thing was smashed pretty bad. I had paid $1500 for the laptop, including $400 for the 4-year extended warranty - which did include the accidental protection. Dell promptly shipped her a new one and she had it in 3 days. Chrysler replaced my engine '02 Chrysler Sebring at 78000 miles - beyond regular wty - with a brand new engine at a cost of $5,500 because I had a 7 year or 100,000 mile (extended) warranty. Frankly, if I was buying a Benz, Toyota or Honda, I probably would not purchase one but with any of our domestic brands, unfortunately, I would not buy one WITHOUT an extended warranty. Trust me, it is well worth the (approx) $1000. This list actually goes on and on and I have saved $$$ with numerous items. However, I think what you do have to kinda keep in mind are the following factors: Cost of the item vs Cost of the warranty Is it something that is liable to break? (I don't think I need one for a toaster) How long will you use the item? Basically, I am all FOR extended warranties for items that have a tendency to break so long as the cost is 'reasonable'. If they want 50% of the cost of the item, they can keep it. Hope this info helps. If anyone would like any further details, feel free to write me at ahk06032@yahoo.com

  • 25 Posted by imj2y on Thu Sep 3, 2009 4:23PM EDT Report Abuse

    I would include any new gaming device as well. My kids are on the 3rd Xbox since Jan07, both of them just died, probably from being dropped or kicked ever though I did not see any phyical evidence, and to this day I have no idea what happened. I knew they would be tough on the system so I purchased the extended warranty from Toy's R US. No questions asked when I brought them in for replacement...

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