Extended warranties are just as popular as ever. The stores and the manufacturers love to sell them. Some people love to buy them. In order to give you my best piece of advice on this subject, I need to tell you a couple of stories. You can decide after that fact whether or not you want to pay for that extended warranty.
Extended Computer Warranty Story Number 1
When I first got out of college, I used to work for a major chain of consumer electronics retailers. This store sold more consumer electronics than pretty much any other company in the area. They were also big on selling their Consumer Protection Plan. That was what they called their extended warranty.
The salesman used to really push these extended warranties. Sometimes we service guys would help to sell them. I never really felt good about selling them, but it was part of my job. So, I did it anyways. I didn’t feel good about selling that extended warranty because of this reason:
I learned through the grapevine that the company was only paying back ten cents on the dollar for repairs. That meant that nine out of ten cents that a customer paid for the extended warranty went to the gross profit on the sale of the product. If people knew that fact, I doubt so many of them would have purchased it. But, this was back in the day when computers cost thousands of dollars. The extended warranties were only around $149.00 or so. Therefore, people figured it was good insurance against computer problems.
The one thing they didn’t realize is that none of these warranties covered any software issues with the computers. They only covered hardware malfunctions. As most people realize, the hardware is a lot more reliable than the software. Everyone has software issues. Usually there is some kind of software glitch with a computer every month or so. We have just gotten so used to dealing with these little glitches that we ignore them or in my case you just fix it right away.
My Own Personal Experience With An Extended Warranty
This story is about cellular phones and not about computers, but I think the two are close enough that you will be able to relate to it. Plus, I really like sharing stories of exceptionally poor service.
I am a Verizon Wireless customer and have been for many years now. I purchase my phones there and subscribe to their service plan. In my geographic location, they are really the only service that has reliable coverage. I spend a lot of time on the road so I pay attention to such things. That is why I stick with this company. So now for the story:
When I got my first cellular phone I decided to purchase the extended warranty on the phone. The phone cost me about $400 as I recall. I thought that paying three dollars per month was worth the coverage in case something went wrong. Well something did go wrong.
This phone used to have one of those retractable antennas on it. It was a small antenna on the top of the phone that you could pull out and extend for better reception. I always wore this phone in the holster that clips onto your belt.
One day I had the antenna break off on me. At that time there was only one store in my area that did service work on the phones. So that is where I went. I went in and explained that the antenna was broken and that I needed a new one.
Of course I was told that the antenna was not covered under warranty. I explained that the antenna broke under normal use. I also explained that the reason I had purchased the warranty in the first place was to cover things like this. The girl told me that she was sorry but they would not cover the cost of that antenna. Needless to say I was a little miffed. She told me that broken antennas on my particular model of phone (StarTAC I think) was quite common. I bought two new antennas on the spot. I think they were about ten dollars each.
I was stunned at the idiocy of a company not covering a $10 (retail cost) hardware component. Knowing the insane markup that they have at those stores on such things, I can assure you that the antenna did not cost the company more than a buck or two. So, they were denying a warranty claim for a part that cost them a buck or two. That is utterly ridiculous. I immediately decided to drop the insurance (a.k.a. extended warranty right then and there). I told the girl there was no way I would ever pay for an extended warranty from them again.
Whatever you do – Never Ever Ever Pay for Verizon’s Extended Warranty or Insurance Plan.
I should have known better based on my experience with extended warranties in the past. I thought this time it might be different. I have never recommended or bought another extended warranty since. I have told all of my friends and countless other people about my poor service from Verizon. In my opinion it was downright criminal not to cover this. I have other issues with Verizon warranties that I will not explain in this post. Just rest assured that they do not stand behind their own brand.
Extended Warranties and Insurance Are Right For Some People
I still know a lot of people who would rather pay for the extra coverage at the time they make the purchase. If you want that kind of peace of mind then be my guest. I do not recommend them though. I know that the main reasons companies offer them is to add nice profit margins to the sale.
In my opinion there is only about a 10% chance that you will actually use that extended coverage and actually have your problem covered by it.
A warranty like that may be appropriate if you are buying it for someone who will be traveling a lot or for a college student living in another state. Maybe you will get a faster repair if needed. Make sure you read the fine print.