As featured in The Wall Street Journal, Money Magazine, and more!

Upgrading My Living Room Entertainment, Part 2: Extended Warranty

by Flexo on August 30, 2007

in Uncategorized

In writing about the purchasing of a new Sharp Aquos HDTV, I forgot to mention the extended warranty. I tried to use circuit City’s extended warranty as a bargaining chip to see if the salesman could lower the price. That didn’t work, so I left the store without the plan. For $190, if the television stops functioning properly in the first three years of ownership, Circuit City will send someone to attempt repairs. If the television cannot be repaired, Circuit City will replace it. I know that Circuit City makes tons of money on extended warranties like these, but it may just be worth it for a device in which the technology is still so new, and replacement costs would be prohibitive. $63 a year is not bad for this kind of insurance.

The friend who was helping me transport and set up the equipment says he usually will buy extended warranties on expensive electronics, even though it bothers him that they are cash cows for the company. When a piece of equipment stops functioning 18 months after the purchase — past the limit of the manufacturer’s warranty — it can be frustrating. Is peace of mind on a $1,300 piece of equipment worth $63 a year?

For comparison, a phone from Verizon Wireless that costs $100 can be insured with replacement protection from that company for $72 a year (and you’ll still have a $50 deductible). I think it’s clear which one is a better deal.

I still have several days to think it over. What would you do?

VN:F [1.7.4_987]
Rating: 0.0/5 (0 votes cast)


Email this article Email this article Print this article Print this article
Share this article: Twitter | Tip'd | Facebook | Delicious | Reddit | Digg
About the Author

Flexo, the owner and creator of Consumerism Commentary, has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow him on Twitter.

If you enjoyed this article, get the free RSS feed or get daily emails.

Join the free Consumerism Commentary newsletter. Enter your email address here to receive weekly emails with behind-the-scenes information, exclusive giveaways, and money tips.



Related Entries on Consumerism Commentary

  • I skip on the extended warranties. I've added up that even if something would break, I've come out ahead by never purchasing them.

    I find it's easier to pay with a credit card that doubles the warranty (for free) when you use the card. That provides some additional level of protection without paying a fortune.
  • Anne
    Keep in mind also that while it's a $1300 TV now, the prices will continue to drop, and a comparable TV should be considerably less expensive by the time you'd need to replace it. Also, a TV doesn't get abused as much as a laptop or cell phone or anything else that gets carried around. Finally, you can live without a TV if you have to. I'd skip the warranty.
  • Tom
    I don't care if you listen to the cheapwads or not, you could also say it's cheaper to take money and instead of paying for home insurance to put it into a high interest bank account, but that doesn't mean you'll wanna spend the full replacement costs on the item when it fails before you're done with it. You might not have $1k later because you sure as heck aren't gonna stoop to buy last years model for a few hundred less than this years when this years is just SO MUCH BETTER.

    The insurance they sold me worked, i dropped my camera on the lens and they replaced it. They still sold that camera though, albeit about $50 less, and just got another one and handed it to me. Luckily they had no idea what they were doing and refunded my original warranty too to re-sell it to me on the new camera, which is NOT what you're supposed to do, but why should I complain?
  • @ Tom,

    "I don’t care if you listen to the cheapwads or not, you could also say it’s cheaper to take money and instead of paying for home insurance to put it into a high interest bank account"

    You may call me a cheap-wad, but the protection plan financials do not make sense to me. A flat-panel TVs depreciate at about 25% per year. If you pro-rate the buyer protection plan over those three years and consider depreciation, you're paying around 6.3% per year to protect a quickly depreciating piece of property. This is much better than Verizon's deal, but still very large. Since less than 1 in 20 of my electronics purchases fail in the first three years (more like 1 in 100), I skip over them.

    I can understand if you find it more comfortable to have the protection plan, especially if you're prone to dropping things, but I think it's disingenuous to argue that it's always a good deal when you can double the manufacturer's 1-year warranty for free by using the right credit card.

    You compare that to homeowners insurance. The mortgage company kinda insists on it, so it's a requirement if I want to own a home. Still, my homeowners insurance runs about .375% of my house's replacement value per year, an order of magnitude difference.
  • D M
    I used to work at Best Buy Headquarters - I was a consultant for their IT department and worked closely with store operations. (BBY and Circuit City are roughly the same.) The extended warranties are pure profit for them. A $200 service plan might cost BBY $20 - maybe less. They don't want to say it, but probably 90% of their profit is from selling these plans the rest of their profit is from selling overpriced accessories, as you found out with the cable. The margins on the TVs and electronics themselves are relatively small.

    I think the argument goes that most failures occur within the manufacturer's warranty period, so the number of claims that fall within the extended period are very small.

    So, the question is, how long is the manufacturer's warranty? Do you need coverage beyond that point? If so, can you get it from somewhere else for a more reasonable price?

    One last thing, BBY claims that no one is getting commission selling these plans. This might be true, but the employees are drilled from day one to sell these things at every chance they get. With the profit margins so high, you can see why you can't leave the store without being bugged 3 or 4 times about it.

    Good luck!
  • ABS
    Depending on your payment method you might have an extended warranty tied to your credit card. I use the Amex Blue Cash Card and it extends the warranty beyond the original manufacturers warranty. It will double the existing warranty but maxes out at a total extension of 1 year.
  • http://www.sharpusa.com/products/FunctionPressR...

    "This free program will provide an enhanced experience for customers who currently own or purchase a 42-inch or larger Sharp AQUOS® LCD TV...Members will also receive priority repair services, including next business day scheduling and expedited service visits. If a television is removed for repair, the customer may be provided with a loaner TV until the repair is complete."

    The Sharp already has a 1 year parts/labor warranty and will back up their product. Circuit City just wants more of your money.
  • John
    I tend to skip the extended warranties, but on a large purchase of fairly immature technology, I'd think I'd go for it even though my credit card would double the manufacturer's warranty. If there ever was an issue, its just easier to deal with the extended warranty through CC than the credit card. I also think that people forget that in addition to protecting an asset, the purpose of insurance (and an extended warranty acts as de facto insurance) is peace of mind. I'm very happy not to have the opportunity to "get my money's worth" out of my auto or homeowner's insurance policies, but I'm sure glad I have them. So, it comes down to a question of head and heart. I'd do it.
  • Marilyn Clalire
    On warranties, Asian Made Garbage, Best Buy and Tv's - I also have been in the habit of not buying extended warranties. I have always had very good service from all appliance purchases - UNTIL NOW. I made the mistake of buying an OFF-BRAND television. I had no idea how OFF it was. I bought BEST BUY'S own Insignia brand television for $500. Now that I need service after 18mths., Best Buy told me it's not there responsibility that the manufacturer, who they will not name, and the part, which they cannot or will not name is not available. Add Best Buy brand products to your throw away list - neither they or Insignia have any interest in being of any help in getting this television serviced. Find out IN WRITING - who manufactures any large ticket items you buy - if it's made in Asia - BEWARE!!!!
  • A
    Buy it with your Visa card and they'll extend the warranty by a year for free.
blog comments powered by Disqus

Previous post: Market Update, August 29, 2007

Next post: 10 Tips for Buying a Residential Rental Property, Part 3: Be Aware of Local Rental Regulations