Are extended warranties worth it?

January 27, 2011 · 33 comments

I’m writing this blog post on my three and a half year old laptop, listening to music on my two and a half year year old phone. Both devices are Apple products. Both devices had a warranty. Warranties that cost me a pretty penny ($160 for my laptop and $99 for the phone). I can’t help but feel like I got tricked out of $259. And thus begs the question: Are warranties really worth it?

I’m willing to bet all the money in my wallet ($7 at the moment) that the answer is, more often than not, HECK NO! Perhaps I should clarify, Standard Warranties = Good. “Extended” Warranties = Satan + Hitler – Brittany Spears. I can’t think of one time I’ve been able to collect on an extended warranty, not one. Here’s why…

Quality Matters:

Forums, customer review websites, Facebook, Google, etc have all helped give the consumer more power. Companies know if their product sucks, people will A) report them to the Better Business Bureau, B) create a Facebook fan page called “XYZ Company kills babies”, and C) buy something similar from a competitor. In fact, most companies are so confident in their product they often offer free warranties for a specified period of time. Most electronic devices are covered for 3-12 months. Cars anywhere from 30,000-100,000 miles. REI products are covered for life. All at no extra cost to you the consumer.

If it hasn’t broke, it probably wont:

Think about the last television you bought. It probably came with a standard warranty (something like 90 days), but you probably also had the option to buy an extended warranty (maybe 2 years). I’m guessing that the majority of TVs that survive 90 days, likely make it to the 2 year mark with no issue as well. Things typically don’t spontaneously combust. When you buy a warranty you’re betting the product will break. The company offering the warranty, however, is betting it wont.

Extended warranties generally don’t cover stupidity:

I’d be way more inclined to purchase an extended warranty if they covered things like stupidity. Unfortunately, most warranties don’t. Here’s what I mean. I paid $800 for my Macbook plus another $160 for Apple Care (meaning instead of only being covered for one year, my laptop was covered for three). My laptop made it through the first year just fine. Eighteen months in, however, clumsiness kicked in and my laptop fell off my bed, resulting in a small dent in the casing.

In the one second it took my laptop to go from bed to floor, I lost all $160 I invested in the extended warranty. Why? Because dropping my computer voided my warranty. Apple Care doesn’t cover stupidity. I started having hard drive issues a few months ago (over a year after I dropped it, so the Hard Drive issue wasn’t related to the drop) but Apple said that they would not replace my laptop as the dented frame voided the warranty. Bummer dude.

Insuring your phone, car, or laptop is all fine and dandy, until you do something that accidentally voids the warranty you already paid for. Don’t drop that phone. Don’t knock that computer against a counter. Don’t let someone drive their car in to yours. If you do, you’re likely up a creek without a paddle.

Companies aren’t stupid:

If the three previous points don’t have you convinced that extended warranties are the worst thing since Bristol Palin was on Dancing With The Stars, then this question will surely sway you… Do you really think businesses would offer a product that hurt them financially? Do you think Apple would sell AppleCare if they weren’t making ridiculous profits off it? Do you really think car dealerships would sell you extended warranties if they lost money on them? HECK NO TECHNO! Businesses are about making money, not losing it. They generally offer extended warranties for two reasons.

A) the amount they charge for a warranty, compared to the number of people eligible to claim benefits under the warranty, is in favor of offering the warranty. They probably sell hundreds, or thousands, of warranties for every one person that actually collects on it.

B) The warranty probably has a bunch of small typing that you didn’t bother to read. You might buy a warranty on your first house and be shocked to find out that things like the roof, water heater, electrical outlets, and air conditioning unit are not covered. Moral of the story kids, read that fine print before you sign anything! Unlimited warranties are harder to find than a sober person at ASU.

I’ve decided I’m done paying for any type of warranty in the future. Instead I’ll have so much freakin’ money in the bank, I’ll just self-insure. It will be psychologically difficult (since the warranties do provide a peace of mind), but I just have to remember the scoreboard; Warranties: 5, Ninja: 0.

How many things do you own right now that you paid for a warranty on? Have you collected on said warranty? Am I the only person that thinks warranties are, more often than not, a big fat waste of money?