Daniel HamermeshYou shouldn’t buy the extended warranties on electronics and other goods that places like Best Buy are pushing when you purchase their products (unless you think you have an unusual tendency to buy lemons, are remarkably hard on products you purchase or are extremely risk-averse). But what about deals offered by your plumber or your HVAC firm, which for a lump sum give you a discount on future purchases? This adds a new dimension, in that we are guaranteed priority scheduling on any repairs. Unlike an extended warranty, this deal allows us to economize on our time when we need repairs. On purely monetary grounds it probably doesn’t pay for itself; but figuring the opportunity cost of my time or my wife’s at one-third our wage, the time saved more than justifies joining the “Ben Franklin Society” for the plumber, or the Silver Medallion Society with the HVAC firm. I would bet that those buying these additional services are disproportionately high-wage people; but who’s buying extended warranties?
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i always do only because my macs seem to konk out on the 2nd year!!!
I would agree with your advice if I were one of those people who believe it’s sometimes OK to ride a bicycle without a helmet. After all, when you go down the street just for a short ride, what are the chances that something bad would actually happen? In most cases, none at all. But what about those hopefully rare moments when something rare happens. It would be great if you had the helmet (or the extended warranty) in a sudden rare emergency. Or if something might not age well, as indicated by respondent #1.
I think the third party HDTV extended warranties are a fair deal. I can buy a five year warranty for around $200 on my 50 inch plasma that covers everything that could wrong short of shooting the TV. Since repairs can be $600 for some problems, this spares me a headache if I have a problem.
I know that on average, only a few percentage of TV’s will have these issues, but if my TV is one of them then it will hurt. If I don’t have any problems, then I don’t feel too bad about spending $200. Also, I look at it as a paying protection money to Mr. Murphy and his Law.
On the other hand, I did not take Best Buy’s offer of a $149 two year warranty on my $300 PS3 slim. If it had been $20, then I would have been more inclined to go for it.
I agree with your first statement, wholeheartedly. When I bought an expensive (to replace) SmartPhone recently, I went for “the plan”, simply because I know my phone will take a beating.
But then when you do the math, you come to the second part of what you wrote: at $8/month extra ($100/year, $200 over the two-year contract . . . against a $350 Early Termination Fee is the absolute worst happens), the finances aren’t really there except when I ask myself whether it’s worth the thought/effort involved when something goes wrong.
Same applies to the fee I pay to pre-pay for a discount of my furnace or air conditioner needs repairs. This just isn’t about money, it’s about your time . . . but only for certain things.
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I have on all of my mp3 players (e.g. ipod). I looked at what the warranty covers and found that the battery was. I listen to my mp3 player for >40 hrs per week. This means I go through a battery every 6 months or so.
The warranty costs about the same as the battery, and lasts for 3 years.
In the last 4 years, I’ve gone through 7 batteries and received one free mp3 player through Best Buy’s “lemon policy.”
(normally, I would not buy the extended warranty, but I ran the numbers on this one and my disproportionate use of the product justified the warranty. )
I regularly purchase maintenance contracts sold with my furniture. I have used my leather couch warranty three times in about seven years, and with several children and a dog, it’s quite handy to have one.
My homeowners insurance gives me a slight discount for signing up for the oil company’s service plan — which includes an annual cleaning/tune-up and emergency service calls on a bunch of (listed) covered items. Hard to say how much I’m overpaying, but over the long run, if the heater stops running just once, having them show up within an hour to get it fixed may make it all worth it…
I can’t recall ever buying an extended warranty. I always figured the money I saved by NOT buying one for everything I buy can replace the things that die off prematurely on me. To my benefit, nothing memorable has ever bit the dust.