You are standing at the register, having just dropped $2000.00 plus dollars on that new LCD big-screen TV. You know the question is coming even before the cashier asks, “would you like to buy the extended warranty for only $239.95?”
Extended coverage for electronics come in two flavors: service contracts and extended warranties. Warranties typically only cover manufacturer defects. Coverage for cell phones will be covered separately. Common names for these coverages are service plans, replacement plans, and extended warranties. Usually when a merchant refers to an extended warranty they are referring to service
Most electronics come with a manufacturer’s warranty. There are two types: express and implied. An express warranty is what they sometimes label as a “limited warranty”. The manufacturer explicitly details what is covered and what is not. An implied warranty (of merchantability) is more broad, and in some states never expires. This implied warranty means that the item should work as reasonably expected: you buy a new blender – it should blend. Keep in mind that all “warranties” are in fact a legal contract. Read the terms of the warranty (contract) and not the brochure to determine coverage.
Is the extended warranty worth the money? As with all “insurance”, it depends.
The particulars for electronics are mostly related to risk and benefit, but don’t forget the U-factor. Electronics are notorious for breaking and being vulnerable to storm surges; it should be kept in mind that the more complex the electronics the more likely the device is to fail.
Most high-end electronics are, or have parts, manufactured in countries with cheap labor (e.g. China, Mexico, India, etc). Buy that fancy big-screen LCD TV and expect that the weakest link is the cheap parts made by the lowest bidder. If your LCD TV goes, you can expect to pay lots of $$$ to diagnose and fix it. And don’t expect just because you bought the warranty/service you are safe. The companies providing the coverage are not always the same company you purchased the device from. OUCH! Buy that $2000 TV, then it breaks in two years and you find out that the $200 you spent on the service contract doesn’t exist? Be careful. Do your internet research: check web blogs for customers who have experienced this problem. What did the retail store do to accommodate them?
Obviously, the more expensive the electronic device, the more you want to protect yourself from loss of that item. But some consumers fallaciously assert that “good” brand-name electronics don’t malfunction, thus they do not need to purchase a warranty. There are several problems with this logic: not all products from a given brand are of the same quality; the idea of a “good” brand name is subjective and much more dependent on personal preference (U-factors); not all devices malfunction because of engineering defects (lightning strikes will fry even the best made electronic device); and going back to U-factors, what’s more important to you, the cost of the warranty or the inconvenience of having to bring it to a repair shop?
BENEFIT
Your costs are somewhat fixed. You spent a x-amount of dollars on your electronics, and you don’t have to shell out more when it breaks. You can take it to one location, or call a service number and have it picked up. If you choose a replacement plan, you don’t have to wait for it to be repaired.
Some extended warranties only extend the manufacturers’ warranty by a year or two. Find out how long the original warranty covers the device: if you only get an extra year, it may not be worth it to you. Some extended warranties for computer electronics give you additional tech support for the entire length of the warranty. AppleCare provides this benefit.
But remember, this only buffers you for the first few years. If you expect to keep it longer than the length of the extended warranty you may want to consider simply saving money for future repairs or replacement. DVD players (not Blue-Ray) would not be worth a service contract. Why? Because the benefit does not match the cost – just go buy a new $50 DVD player in 3 years.
COST
Example: Panasonic 42” Flat-screen Plasma TV ($1599.99) at BestBuy. 4-yr service plan is $299.99 or 18.7% of the price of the TV. Typical repair is approximately $150 for a diagnostic fee plus labor and parts. I was in a TV repair shop recently. It was like the Night of the Living Dead for flat-screen TVs. When I asked why there were so many just lying around, the repair tech replied that the owners abandoned them because they could not afford to repair them.
U-FACTOR
Maybe for you, more important than cost is how important is it that you have a working device? Can you live without the item while it’s being worked on? What if it has to keep going back in to be correctly fixed? Do you use it for your business? Do you have another item to temporarily replace it while it’s in the shop? Do you usually replace this type of device every year or two? ALL IMPORTANT questions to consider before you decide.
Replacement plans are especially nice if your down-time, or the time
