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Business Week artcile on Extended Warranties


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14 replies to this topic

#1 of 15 OFFLINE   Peka J

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Posted January 20 2005 - 10:56 AM

This article is from Business Week last month. I knew extended warranties were a huge source of revenue, but I had no idea that it was such a significant part of their profits. Circuit City would essentially be in the red if not for extended warranty sales.Posted Image

Sorry if this has been posted before, or if there is a more appropriate forum for it. I know lots of people buy extended warranties on TV's even if they never buy them otherwise, so I figured people here might be interested.
http://www.businessw....3110_mz020.htm

#2 of 15 OFFLINE   PeterMano

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Posted January 20 2005 - 11:33 AM

Extended warranties are the biggest ripoffs under the sun in most cases. First off, the manufacturer's warranty is in effect for the initial time period, so you're basically giving them your money for nothing during the mfgs warranty. If you're going to have problems with an electronics item, you're going to see the majority of problems during that first 6 months to a year where it's still covered under the mfg's warranty. Additionally, the farther out you go with any item, the more diffiicult it becomes claiming a defect as opposed to normal wear and tear.

Plain and simple, they're a rip off. Salespeople get paid big dollars to sell these on people. A local chain just lost a sale on a projector from me, for their obnoxious hawking of an extended warranty. These guys were really dumb. When I asked them, if I don't buy the extended warranty, how is servicing handled during the warranty period? Answer. You have to ship it off yourself and pay for shipping and handling. Thanks for leting me know, you have no intention of supporting me after a sale.

So, I went to a single store AV dealer, and asked about warranty coverage and what should I do if it needed servicing. Not a peep about an extended warranty and he told me, just bring it there and they would arrange everything else. These guys were looking to sell the projector and their services as an AV specialist, not extended warranties.

#3 of 15 OFFLINE   Dave Bennett

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Posted January 20 2005 - 01:24 PM

I've had salesmen tell me "wow are you sure you don't want the warranty? These [insert brand and product here] are really unreliable" and I've said "well if they're so unreliable then maybe I'll just not buy it".
I almost did the same thing when I was buying my RPTV a few weeks ago but the guy backed off and he was giving me a pretty good price so I wasn't about to just bail.
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#4 of 15 OFFLINE   SimiA

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Posted January 20 2005 - 03:07 PM

If you use a credit card for your purchase, many of them offer a doubling of the existing warranty @ no charge.
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#5 of 15 OFFLINE   ChuckSolo

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Posted January 20 2005 - 07:23 PM

You guys know that exteded warranties are really only specialized insurance policies right? That is the reason I NEVER buy extended warranties. If you are going to be making payments on a car for 5 years for instance, and your standard warranty is only 36 months or 36K miles , then it makes sense to buy and extended warranty for the remaining two years of the contract, but on electronics I would say no, unless you are buying a 10,000K 80" Plasma on the easy payment plan.Posted Image

#6 of 15 OFFLINE   Mike_J_Potter

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Posted January 21 2005 - 12:25 AM

Another reason I like buying anything I can online. The guy at Best Buy really put the squeeze on me when I bought my rptv two years ago. The only way to shut him up was tell I only had enough money to cover the TV, Tax and delivery. Its just easier to wait a few days for shipping then have to deal with sales people trying the hard sell.
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#7 of 15 OFFLINE   Peka J

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Posted January 21 2005 - 03:17 AM

I generally prefer buying things online as well. With something like a TV, I like the ability to bring it back if something is wrong with it right away (30 days). Most online sites don't allow returns even for a defective product - you have to have your brand-new multi-thousand dollar item repaired when you have never had it in good working order to begin with.

Anyway, I am planning on buying the pioneer 5041HD plasma that Best Buy has on sale, and might get the extended warranty for peace of mind even though I know they are ripoffs. Its expensive insurance.

#8 of 15 OFFLINE   Lev-S

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Posted January 21 2005 - 10:17 AM

Having worked in a big retailer and being pressured to sell extended warranties, I think its important to understand what is being offered by both the manufacturer and the retailer. In some cases the extended servicing benefitted me as well as other people I knew. i.e - (Exchanging a Playstation 2 a gazillion times). Other times, I wonder why I got it in the first place. And as for the naivety of "the manufacturer HAS to fix my product" in the term of the manufacturer's warranty, it is always good to clarify what is and isn't covered at the point of sale. Making a rash decision based on principle rather than logic can end up making things worse/cost more when things go wrong down the road.
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#9 of 15 OFFLINE   PeterMano

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Posted January 21 2005 - 01:01 PM

We need to make a distinction here between extended warranties and PRP contracts like the ones EB sells for ps2s and other game consoles. PRP plans are not warranties per se, they are product replacement plans. Once used, they're null and void. An extended warranty shoud be good for the entire period it runs for.

#10 of 15 OFFLINE   Lev-S

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Posted January 21 2005 - 01:58 PM

Quote:
PRP plans are not warranties per se, they are product replacement plans. Once used, they're null and void.


It is different from store to store. Some stores exchange once, exchange indefinitely, or get it repaired like a manufacturer's warranty. Again, by clarifying it, one can make an informed decision before spending their money on a service that may or may not benefit them.
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#11 of 15 OFFLINE   PeterMano

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Posted January 21 2005 - 04:18 PM

Point taken, EB's prp plans are one shot deals.

#12 of 15 OFFLINE   Thomas_A

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Posted January 22 2005 - 02:13 AM

I had to use my extended warranty on my 56" zenith after 4years... saved me quite a bit of money. I only buy them on high dollar items where ya never know. IN general..they are a rip-off...depending on what the item is IMO.

#13 of 15 OFFLINE   ChuckSolo

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Posted January 22 2005 - 04:24 AM

Thomas, I agree entirely, on high ticket items, an extended warranty is probably a must. I laugh though when someone wants to sell me an extended warranty on a 50-100 buck DVD player.Posted Image

#14 of 15 OFFLINE   Gil D

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Posted January 23 2005 - 09:22 AM

Quote:
Anyway, I am planning on buying the pioneer 5041HD plasma that Best Buy has on sale, and might get the extended warranty for peace of mind even though I know they are ripoffs. Its expensive insurance.


You had better check stock as they were all out in my neck of the woods last weekend! Another reason to go for the newer 5045HD mail order.

#15 of 15 OFFLINE   Kenneth Harden

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Posted January 23 2005 - 05:43 PM

There is another wild card.

They base that plans on a 'normal use'.

Lets say you are buying a subwoofer and you know you will be beating the snot out of it daily for years and years. You might actually have the odds in your favor of the thing buying the farm.

On big ticket items (as in, something that doesn't cost chump change to YOU), it starts to make sense, especially on large TV's. A friend's >1 year old Sony RPTV just blew a gun or something major and it is as good as dead. If it wasn't for the service plan, he would be ...up a creek...

Obviously, its your money, but *sometimes* it is a win-win situation.





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