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Dec 20, 2005 -- Why extended warranties are no good
Did you know that 100 percent of Circuit City’s annual profits come from the sale of extended warranties? How about Best Buy? Forty percent comes from extended warranties. That’s why salespeople are all over you like a cheap suit when you go to Circuit City or Best Buy. Clark just read a Consumer Reports article on extended warranties that confirmed how useless they are. The only product CR says is worth it is a high end treadmill. The smartest thing you can do is to buy an item on a credit card because some of them automatically double a manufacturer’s warranty. That’s like getting a free warranty. Business Week got more in detail with extended warranties. The magazine found that if you were to buy a $1,000 RCA digital TV, Circuit City charges $100 for the warranty. Best Buy charges $62. But WalMart charges just $29 for the same warranty. So, it’s a huge mark-up. Salespeople receive a huge amount of pressure to sell these things, and you pretty much never should buy one. Appliances, electronics and computers rapidly decrease in value as soon as you take them out of the box. Why would you want to insure that? Plus, the average cost of a warranty is as much as a repair. So stay away from extended warranties at all costs.
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We bought a 5-year warranty for our refrigerator. 6 months after we got the fridge, it quit working. We scheduled a service call, but the technician never showed up. Turns out they never actually scheduled anyone.
Now they are saying it will be 3 weeks before they can get someone out here. Who knows how long it will be after that before they decide to fix or replace it? Because a refrigerator is such a crucial item and it's going to be so long until they can get to us, we asked them to exchange it or refund our money. They said they don't have a way to do that in their system. They won't even loan us one... though they kindly offered to sell us another since we need one so desperately!
Mind you, this is for an item still under the factory warranty! Now that Best Buy has our money, we are kind of over a barrel. Fortunately we paid with a credit card, or we'd have no recourse at all.
Moral of the story: don't buy anything from Best Buy that you need. If it breaks, you're out of luck.
laptop accidental damage policies
are these policies any good and should I get one?
It's a Gamble....
I have never bought extended warranties, but have kept track of whether or not it would have paid to have done so. After 20 years, I had one case where it may have paid off although I would have broke even either way. I had one time they offered me an extended warranty for $32, on a printer I was buying at the time for $29. Even the salesman got a kick out of that one. And I just had seen the person ahead of me buy that warranty. Lets face it, it's a insurance policy! How many insurance companies operate from small back rooms & go bankrupt. They are some of the most profitable businesses out there. 99% of the time you are better off passing on it, but if your that 1% I'm sure you wish you had gotten it. Not me, so far the odds have been in my favor by far. By the way, that printer still works fine long after the extended warranty would have expired. Although it is also long obsolete as is many times the case with electronics, it's time to replace it...
HDTV Warranties, you better do some research...
I'm no expert on appliances or laptops, but when this guy says not to get the extended warranty on an LCD or Plasma TV, you might want to do some research before you listen to that piece of advice. Clark Howard's source is Consumer Reports and Consumer Report's data comes from people who subscribe to that magazine and send end annual surveys. How many people reading Consumer Reports bought a tv over $1,000? Over $2,000? How many tv's in their survey that needed repair were larger than 32"? The bigger the tv, the more costly it is to repair. If you want some incite on Consumer Reports, head over to their FORUMS and checkout the countless threads of people who listened to their advice and are now looking at a pricey repair. Consumer Reports simply says, "Sorry, thats tough luck." And here is the worst part of Clark Howard and CR's recommendation: A good majority of tv's being made now are impossible to repair! The parts are non-existent or the company went out of business after you bought it. In those situations, you will receive a replacement from the store if you bought a plan.
Extended Warranties
I really love the fact that so many people do not know how to think for themselves or determine what is right for them. We live in a world where people want to take the easy road when it comes to thinking on their own. That is why shows like this one are so popular. People look for someone to tell them how to spend their money instead of them researching things for themselves. Most people who walk into Best Buy to buy a warranty listen to the sales person for about 2 secs and as soon as the salesperson says we offer such and such to help protect your investment, people turn their ears off and revert back to what they heard on this show. In reality, if they would take the time to listen and understand that what Best Buy sells is not an "Extended Warranty" ,but a protection plan that goes above and beyond that manufactures cover. This site has failed to mention that Best Buy's protection plan covers normal wear and tear, depending on what plan you purchase, they will even replace your laptop if you spill something in it or drop it off a building and it breaks. Do manufacture warranties cover a unit if it gets hit by lightning? No, but Best Buy's protection plans will. The plans they sell on the gaming systems, ipods,digital frames and your smaller electronics will replace and not fix the item. I have worked for Best Buy and will tell you that if you give the salesperson a chance to properly explain the plans you will be a happier customer.
Major Appliance Extended Warranties
100% of Circuit City's Profit comes from Extended warranties? That is amazing. How do you know this is a fact?
Also, when you state "the average cost of a warranty is as much as a repair" it makes me wonder... Have you researched the average cost of repairs on a major appliance lately? Just to have someone come to your house and diagnose the issue will cost at least $80, and after that you still have to pay for parts & labor. The price of extended warranties on major appliances are significantly less than the cost of repairs in most cases. For a 4 year extended warranty on a major appliance you will pay $120 at Lowe's, $200 at Best Buy, $350 at Sears and $99 at The Home Depot. The cost of repairing a major appliance is often times much more than that, and the cost to replace the product is definitely more on the higher ticket items. I agree that consumers should be savvy shoppers and save money every chance they get, but I also believe that extended warranties can save money for consumers in the event their product needs to be repaired - especially on a major appliance. Major appliances are becoming more high tech every day with the cost of repairs on the rise and the ease of fixing it yourself declining. Long story short, do the research and see if it is right for you before declining something that will give you peace of mind and may save you some cash in the long run.
One last thing I am curious about...if you are against extended warranties then why do you allow companies to advertise their extended warranties on your website?
extended warranty
i did one of these from best buy on a computer.. well it's been about a year and the (laptop) monitor has a line thru it.. however, best buy says they will repair it, but they have to ship it to their place.. like i'm gonna let that happen with all the financial data and secure stuff i have on my system.. they don't tell you when u buy it they have to ship it off to fix it and you will be without it for a number of days..
Share the wealth Clark
When the tv's and appliances break down Clark are you going to come fix them?
thx clark howard!
I listened to your comment about not buying a performance coverage, and now I have a broken TV. thx clark howard.
Extended car warranty
2004 Cadillac.44,500 miles. Should I get extended warranty since I do not plan to trade for several years with the economy in the tank? Car get 25mpg.
