Consumer Reports Warns Against Extended Warranties

Consumer Reports has an excellent article this morning warning against the fraud that is the extended warranty. From the article:

“We have long advised against extended warranties. In fact, we feel so strongly that consumers are being misled about them that we took out a full-page ad in USA Today on Nov. 14 to warn shoppers.”

My! That’s nice of them. Why are extended warranties a scam?

“For the consumer, extended warranties are notoriously bad deals because:

•Products seldom break within the extended-warranty window (typically around three years), our data show.
•When electronics and appliances do break, the repair often costs about the same as the cost of the warranty.”

For retailers, however, extended warranties are a cash cow. A store that makes only 10 bucks on the TV you purchase can make $50 on the warranty.

Consumer Reports has only two exceptions to the “do not buy” rule:

1) Rear-projection microdisplay TVs, because they often break and are expensive to repair…
2) Apple computers, because they only have 90 days of tech support, after which it will cost you $49 dollars to give them a call.

So stand firm, consumers! No more extended warranties!— MEGHANN MARCO
Why you don’t need an extended warranty [ConsumerReports]

Comments

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  1. Pelagius says:

    Consumer Reports has only two exceptions to the “do not buy” rule:

    1) Rear-projection microdisplay TVs, because they often break and are expensive to repair…
    2) Apple computers, because they only have 90 days of tech support, after which it will cost you $49 dollars to give them a call.

    If I was a manufacturer of electronics, I would take this recommendation as a call to:
    1) Make a shitty product that breaks easily
    2) Degrade my customer service to the point where it is as wretched as Apple’s

  2. Magister says:

    I have been able to leverage the Best Buy extended warranties as a way to upgrade my 1k Camera every 2+ years for about 50 bucks.

    But for most things it is a crap shoot.

  3. CTSLICK says:

    In general I agree, I rarely buy them but I cross the line at laptops. I have owned two laptops, one HP and one Apple. Bought extended warranties for both…both paid back plus some. I am also money ahead paying a small stipend to our cell phone provider every month for a loss/damage replacement policy on my son’s cell phone…go figure.

  4. missdona says:

    Yeah, CTSLICK. I think they’re a must-buy for laptops. My fiance can fix any sort of desktop hardware problem pretty easily, but he really doesn’t want to pull the keyboard off my laptop.

  5. Falconfire says:

    you should ALWAYS get a extended on a laptop, regardless of who makes them.

    Laptops fail within 1-2 years… ALWAYS. That many high speed moving parts in that close a space with that hot a chip and in your bag… its a recipie for disaster.

    I only once didnt buy a extended warranty on a laptop. That was a 600 dollar mistake I will never make again.

  6. KevinQ says:

    I, also, am well ahead of the game after buying an extended warranty on my laptop. I’ve had a motherboard failure and a hard drive failure, and getting both fixed has cost me $0. Even more, when I went to get my hard drive replaced, I pointed to some general wear and tear on the laptop’s top panel (where my hands rest when I type) and they replaced that for free, also.

    I do hate to rise to Pelagius’ trolling, but not only have my customer service experiences with Apple been stellar (see above paragraph), but Apple are generally tops in customer service surveys.

    K

  7. DaveB says:

    Sharp keeps sending me notices in the mail every 2 weeks “advising” me to purchase a 3 year extension for my Sharp Aquos lcd. The cost is 350 bucks for the 3 year extension. I’m already paying a shitload to Comcast every month and now I have to pay even more money for a warranty that I may or may not need? What does that say about Sharps confidence in their own products when they ask me to pony up for a 3 year extension on a tv that’s less than a year old?!

  8. thrillhouse says:

    Its got nothing to do with Sharp’s confidence in their product. If anything, it says that they know that it will not have a problem in that time frame. They just want your $350 because they know that more often than not, they’ll make $350 of pure profit. Thats the kind of stuff that CR is trying to warn people about.

    With big box salesmen being required to offer extended warrenties on everything (DVDs included), too many people are losing out big time on this deal. And if the salesmen don’t sell enough of these – its out the door they go.

  9. I just bought a new laptop at CompUSA on Saturday. It’s just meant to get me through the last year and a half of law school. It’s nothing fancy, and I only paid $550 for it. Plus, I’m getting back $150 on my old Vaio. So, really my total purchase price was only $400. CompUSA wanted $150 for its protection plan. I decided to just roll the dice on this one. The laptop isn’t nice enough to jack the price up for the chance something might happen to it. The VAIO lasted almost 4 years without any problems, so I’m hoping my luck won’t run out (knock on wood).

    I also passed on the protection plan because the guy who sold it to me was a real jackass, and I didn’t feel like giving him the satisfaction on the commission for the protection plan.

  10. Ass_Cobra says:

    I purchased and HP Laptop at Best Buy in January of last year (I generally wouldn’t, but they had a great sale on it so I got it for ~ $350 then it would have cost from HP directly). I did a little research and it turns out that I could buy a warranty from HP directly which was less expensive than the Best Buy offer and I could buy it any time before my 1 year limited service warranty was up. The only trade-off is that the “accidental damage” coverage would not be in effect until I purchased the warranty, but it was a desktop replacement, so I was willing to live with that. I’ve also not heard fantastic things about the “accidental damage” coverage on extended warranties. When I went through the list of excluded “accidental” items with the sales guy, it seemed to encompass anything I could forsee doing and several things I couldn’t. Anyone have any feedback on how easy these things are to deal with?

    The only extended warranty I can recommend is the Warranty By Net auto Warranty that I purchased. It paid out like whoa. If you own a non-japanese car it’s a must, and when you look at it on a %age of purchase price basis, mine came down to like 3% or 4% of the purchase price of the car. The Bow Motor (retracts the convertible top) burned out and that alone was a $1700 repair covered by the Warranty.

  11. the only time i’d consider an extended plan is when i’m buying something so new it has no real track record. if the tech is less than a couple years old, you’re taking a chance that its effective lifespan will be shorter than the period covered by the plan.

    also one of the reasons (besides poverty) that i’m leery of laser eye surgery. i’m still waiting for the algernon epidemic of blindness to begin 15 years after the procedures began.

  12. juri squared says:

    Once again, I agree with the laptop exception to extended warranties, and any portable electronics device that you’re going to be hard on. I got an upgrade on an old disc-based mp3 player a few years back from Best Buy, and my Fry’s laptop warranty includes an invaluable loaner program. Did I mention I’m on a loaner laptop right now?

  13. max andrews says:

    Just so you know, you can buy an apple extended warranty after the initial purchase for up to a year after you bought the product which is the term of the basic tech waranty. So let’s say you buy a macbook without the applecare warranty. You get your 90 days free phone support and 1 year repairs, and so for that year you are safe from any defects. If you have any issues with the product during that year, you can buy the extended warranty then and be covered for the additional three years minus how long you’ve had the computer thus far. In my experience, if something is going to go terribly wrong with an (apple) computer it happens fairly soon, and as such if you make it past the first year without any big issues your machine will survive for at least another 2 years.

    I’d still get the warranty with a laptop purchase myself but with other purchases like desktops the delayed warranty purchase method is a good way to save $200 or so if you don’t need it, or save a few hundered more if you do.

  14. Demingite says:

    Many a Best Buy executive’s yacht has been purchased by virtue of extended warranty revenues.

  15. Thain says:

    As a laptop tech support representative, I always counsel my friends to buy extended warranties. All you need is one motherboard failure two weeks outside of your 1-year warranty to see that it’s a good idea. It’s no fun to have a laptop that is completely dead in the water and that requires $600 worth of repairs. It’s equally not fun to have to tell someone that, because the sheer volume of expletives utterable in thirty seconds is quite amazing.