How to stop the extended warranty SCAM?

[makelifebetter4ok]

Don' buy it.  The story behind the SCAM.

[Johnboy976]

Sorry, but horribly misleading.

[snopes]

I don't think it's misleading, but I didn't read the entire article. I never buy an extended warranty. IMO, they are all pretty much worthless. For one, most devices such as TVs and refrigerators already have a one-year warranty and if they last that first year without any problems they'll more than likely go a very long time.

[sgrizzle]

quote:Originally posted by Johnboy976

Sorry, but horribly misleading.

Looked accurate to me.

[Johnboy976]

Yeah, well when you consider that most companies make more than $10 on a $100 TV, I am pretty sure that that "insider" view is not so insider. The average company makes 30% off on their TVs, 1/10% on computers, and appliances are usually the largest mark-up... and btw, wires are where the money is really made. As for the extended warranties, most computers have gone bad before that 4 year time period. Even my Mac has.

No, I do not get those extended warranties on everything. Most of the time I avoid them. But to say that they just don't work... expect yourself to shell out another 180 dollars for the Ipod in 1 1/2 years, 100 dollars for a printer in the same time, and 400 for the computer before it's all said and done.... and another thing, did you ever hear of "accidental" service plans? Best Buy offers them now. SO when you drop that computer, it IS covered. They just have to have the thing turn on and off. Even the programming can be screwed up a little.

The SCAM is not as big as you think. Most companies make more money off of their accessories.

[Johnboy976]

Yeah, well when you consider that most companies make more than $10 on a $100 TV, I am pretty sure that that "insider" view is not so insider. The average company makes 30% off on their TVs, 1/10% on computers, and appliances are usually the largest mark-up... and btw, wires are where the money is really made. As for the extended warranties, most computers have gone bad before that 4 year time period. Even my Mac has.

No, I do not get those extended warranties on everything. Most of the time I avoid them. But to say that they just don't work... expect yourself to shell out another 180 dollars for the Ipod in 1 1/2 years, 100 dollars for a printer in the same time, and 400 for the computer before it's all said and done.... and another thing, did you ever hear of "accidental" service plans? Best Buy offers them now. SO when you drop that computer, it IS covered. They just have to have the thing turn on and off. Even the programming can be screwed up a little.

The SCAM is not as big as you think. Most companies make more money off of their accessories.

[sgrizzle]

I bought an extended warranty on my car from the #1 most reputable independent auto insurer. All of the "money advice" people said they were the best one to buy from. They were underwritten by the oldest (like 50+ years) and largest extended-warranty company in the U.S. They serviced everything from car warranties to department store merchandise.

$1200 and one year later, the company went bankrupt.

Weeeee!!!!!



You may want to read the best buy literature more closely. They only cover damage from "Normal Wear and Tear" and do NOT cover accidents (ref. bestbuy.com) Plus, that $180 ipod costs $20 to get a warranty on.

[makelifebetter4ok]

A Circuit City service tech at 41st once told me their extended service plan covered accidents and suggested that I might want to have an "accident" in a couple of years so I'll get a new laptop.

Sounded like a great deal to me.  But, I am real suspicious with great deals, ever since Jay Pal Gumm's offer to off sex offenders.  Always looks great on paper.

[Conan71]

Extended warranties are like health insurance or life insurance, yet I don't see anywhere in the topic so far about the "Insurance Scam".

Insurance works on the most basic principle (let's forget about the investments that make them more money, for now anyhow) of collecting more in premiums than you pay out in claims and pay your seller a nice commission.  Extended service policies work the same way.  There are exclusions just like health insurance.  Insurance is more of a gamble for the consumer than it is for the insurance company.  It's not designed to make you rich, just to reimburse your loss.  Your gamble is to whether or not you will have claims exceeding the cost of your insurance in a given year.

FWIW, I never buy extended warranties on electronic consumer goods.  For one thing, what I buy is usually low-end and comes with a one year warranty.  I agree with Snopes, most electric or electronic consumer goods will fail within the warranty period.  I had a VCR that lasted about 15 years.  The belt was just starting to slip in it about the time I got a VCR/DVD unit as a gift.  I think my two 25"  TV's are in the five to ten year old range, and they are basic conventional remote units with never a problem(less than $200 at any big box).

I worked as the F&I manager of a now defunct Ford dealership in the early '90's.  That's the guy who greets you in the "business office" with a big smile and congratulates you after you've beaten the pants off the salesperson and their manager and you are feeling all smug.  Then the F&I manager proceeds to pull your pants down and reclaim about $2500 to $3000 for the dealership out of your pocket (extended warranties, doc fees, and mark-up on your interest rate- a very little known profit center for dealers).[:O]

We sold both the Ford ESP and another from an independent insurer.  The owner of the dealership always pushed me to sell the independent one because our "cost" was $100 less than the Ford ESP, and the more he sold, the better his perks were from a certain former sports celebrity who was our agent.  At the time, our cost was about $299 for the independent warranty and I sold it with ease for $995.

As long as you brought your car to our dealership which was about 20 minutes from downtown, there were no hassles getting warranty service done.  Other than your $50 deductible, there was no out of pocket expense, including a free rental car and towing.  owever, if you took it to another dealer in the area or out of state, it was a PITA to get your claims taken care of and you waited 30 to 60 days to get reimbursed.  

I took a lot of donkey-chewings over the phone for the convoluted claims process, it wasn't worth the personalized, signed copy of the aforementioned sports celebrity's autobiography I got.  If it were soley up to me, for pure customer satisfaction, I would have sold only the factory-backed service plan.

That said, I've had ESP's on a couple of vehicles which had lots of electronics like an automatic climate control system, power windows, ABS, etc. I had two T-Birds in a row after I left the car biz that I bought ESP's on.  I knew the F/I guy at the time and got them at cost plus $100.  On the first 'Bird I never had a claim, on the second one, it saved me well over $2500 on various brake system and electronic problems over three years.  The truck I have been driving now for seven years, I bought with 16K miles on it and never bought the ESP.  Other than oil changes, tires, wiper blades, and other wear item/ normal maintenance- it's been trouble free.

I'm not saying extended warranties are worthless, but I will say they are a gamble.  You are betting on whether or not you are going to save money in the long-run by buying it, jsut like health insurance.  What ever you do, especially with a vehicle- always buy the factory-backed plan.  For one thing, Grizz's example, the other is that it's seamless from dealer-to-dealer anywhere in the country and unless anything has changed, other than your deductible, you are never out of pocket a dime while waiting for a reimbursement.

[Conan71]

quote:Originally posted by makelifebetter4ok

A Circuit City service tech at 41st once told me their extended service plan covered accidents and suggested that I might want to have an "accident" in a couple of years so I'll get a new laptop.

Sounded like a great deal to me.  But, I am real suspicious with great deals, ever since Jay Pal Gumm's offer to off sex offenders.  Always looks great on paper.

Either you and I had the same person wait on us, or that store manager trains them all to say the same thing.  The same thing was suggested to me on a digital camera purchase a  few years back.

[swake]

I have paid a couple of times for extended warranties on cars (electronics make no sense with the constant drop in price) but only have done so when the extended warranty was actually from the automaker themselves and was just adding time and miles to the new car warranty.

[TURobY]

I work at Geek Squad at Best Buy. On most things, you are right that extended warranties are not needed. However, there are a few items I would recommending getting the extended warranty on.

iPod
I see at least 4-5 iPods come in each day needing service. Typically, the hard drive or the battery has gone out.

Laptop computers
At the very minimum, the free battery replacement almost makes up the cost of the extended warranty. Additionally, the heat that builds up in the laptop causes components to fail more often than you'd imagine.

High-end televisions
For the price alone, you don't want to have to shell out another $7500 for a new T.V. Plus, the bulb replacement on the projection T.V. can be expensive.

Cameras
Especially more expensive cameras. The lens motor seems to fail on a lot of cameras after about two years. Additionally, I see the chipboards go out quite easily as well.

Printers
These are cheap and can be easily replaced.

Appliances
These rarely go out, and when they do, it is within the manufacturer's warranty.

Car stereos
These rarely go out, and are typically replaced by people who care about car audio every couple of years.

Those are the trends I've seen on repairs, at least at Best Buy. But anecdotal evidence is rarely worth much. []

[Rowdy]

How come they don't provide warranties on marriages?  [B)]

[Johnboy976]

Wireless departments see 15% returns. IPod's make up the bulk of it. There are two periods to the return: about 55% of them come in immediately. The remainder mainly come in between one and one-in-a-half years, for reasons such as Roby explains.

And Roby is right, most extended warranties are worth it. As for PSPs... individual Best Buys will offer "accidental" service plans.