When to buy a warranty? The one rule to remember
Filed under: Shopping
The Wall Street Journal's Cheapskate column took a look at extended warranties (subscription required) earlier this week. According to the column, "There's no mystery why retailers push them. In some cases, they make more profit selling the warranty than they do selling the actual gadget. The mystery is why consumers get them. If the retailer makes a lot of money selling them, then it stands to reason the consumer buying the warranty isn't getting a great price."I'm firmly in the no extended warranties camp -- it's overpriced insurance and in the long run, I'll do better taking on the risks of product damage myself. Here's the rule I use for when to buy and when not to buy a warranty:
Never insure against a risk that you can afford to take. But if a product is expensive and vital to your life/work/happiness and would be prohibitively expensive to replace out of pocket, you should cough up the cash for the extended warranty, even if it's a total ripoff.
If someone tries to sell you an extended warranty for an iPod, you shouldn't buy it: It's a risk you can afford to take and most of the time you'll come out ahead by not buying the warranty.
But if you're starting your own business with very limited capital and need a $5,000 piece of machinery that your business will die without, you should cough up the cash for the extended warranty.
And that, I would say, is about all there is to extended warranties: If you can afford the risk of having to buy a new one, skip the warranty. If you can't, buy it.
But if you're starting your own business with very limited capital and need a $5,000 piece of machinery that your business will die without, you should cough up the cash for the extended warranty.
And that, I would say, is about all there is to extended warranties: If you can afford the risk of having to buy a new one, skip the warranty. If you can't, buy it.
Reader Comments (Page 1 of 1)
10-18-2009 @ 3:33PM
Andy said...
I agree with your straightforward logic here, The other option to conisder is buying the extended warranty online, which is often much cheaper than buying it from the store. There are many places that now offer this service.
Andy
http://www.savingtoinvest.com/
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10-18-2009 @ 3:38PM
andy said...
Absolutely agree with your comments. The other item to consider is buying your warranty online rather than at the store you buy the product from. There are many sites that provide manufacture warranties at a much cheaper price.
Andy
http://www.savingtoinvest.com/
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10-18-2009 @ 5:14PM
Mark Weisberg said...
Re.: When to buy a warranty?
Timely and on-the-mark advice.
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10-18-2009 @ 4:20PM
yabbi said...
i'm SO GLAD I took an extended warranty for my Apple laptop. It has had almost ever component (except hard drive and RAM) replaced at least once, and a couple parts twice. Those replacements didn't cost me diddley, even if the extended warranty cost $275. I'm near the end of my 3rd year, and my hard drive crashed a couple weeks ago (stopped mounting/booting). I anticipate having it replaced for free again. The extended warranty has paid for itself. If you're going to get a lemon, it sure helps to be confronted with "no charge" repairs and replacements when you bring it in.
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10-18-2009 @ 7:08PM
Seth said...
typically a manufacturer is only going to cover a warranty on a product as long as they feel comfortable it will not break, so personally I would recommend them on any high end item purchased. I also am a firm believer that you need to compare the cost of the warranty vs the product purchased. If a computer sells for $1000 and the warranty is $200 than it would be a wise investment where as a car that costs $40,000 has a warranty that costs just $2000 than it is a very wise investment.
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11-12-2009 @ 12:34AM
E.J. said...
I look at it from a marginal cost point of view like Seth and think about the bathtub curve for defects ... if the warranty costs a small percentage of the product's price, then it's worth it provided it actually offers something substantial. With that, you can make quick decisions and be on your way. Simple! Even more useful with Christmas shopping around the corner.
If you're too nervous about your item breaking, then why not get the warranty for your own piece of mind? What's the point of buying the item if you can't enjoy it, right? It will just cost more for you in particular, that's all.
I posted my two cents on it here but it's more in the context of buying a TV:
http://hdtv-buying-guide.blogspot.com/2009/10/should-i-get-extended-warranty-or.html
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