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?

1 MindLess

Wow, that’s so strange. Here in Germany we have at least two years warranties on everything electronic. I wonder if the products forthe US market are different from the ones sold here. Otherwise I would never buy extended warranty – if it doesn’t break during two years in Europe, why should it break during the same time in the US?

2 thewanderingbudget

I think the only thing I have a warranty on is my camera, and I probably wouldn’t have bought that except that they bundled it into a really great deal including things I wanted like a case, extra battery, memory card etc. So I really got it for free (and haven’t needed it so far).

I’ve noticed lately that I’m a risky person in general. There isn’t much that keeps me up worrying at night (might be why I’m in debt!). If something breaks and I don’t have a warranty, I just suck it up and pay for it (it still hurts though!). I’ve just always had this feeling I’m getting scammed when they offer me the extended warranty.

I did consider it when I bought my macbook though. Apparently you can buy Applecare until your year warranty ends, so I figured I’d wait and see how it went. Then forgot about it before it expired. I did read that you can buy Applecare on ebay for cheaper though, which is kinda cool.

3 Joe Plemon

Agreed! We used to buy those extended warranties, but finally wised up and, like you, self insured. I think of it as money in my pocket instead of those who sell the warranties.

4 Mo D.

I don’t believe in extended warranties, and you’ve pointed out every one of my reasons, Ninja. We don’t have one item in our home that has an extended warranty… and that’s the way it’s going to stay! Have a FAB weekend, my friend!

5 Kevin @ Thousandaire.com

Extended warranties hardly ever make sense. The only time I’ve ever bought one was for a used car, and when something broke they wouldn’t pay for repairs anyway. On electronics, if it makes it through the first year (covered by the manufacturers warranty), then it will probably make it the distance.

My only question is, what about power tools? I could see a warranty being useful for those.

6 Red

They definitely are a waste of money more often than not. But it’s those couple of times they aren’t a waste of money that people remember. My parents gave me a Gateway laptop as a high school graduation gift, and thank god they paid extra for the warranty because I took that thing into the Geek Squad three times in the first year I had it. If I had enough cash to cover damage to a big ticket item, I MIGHT skip on the warranty, but right now, it’s worth it for those couple of times they come in handy.

7 Jared

Hi Ninja,

I’m on my third Apple laptop since 2003. I purchased the extended warranty on both of my previous laptops and received more than my money’s worth on each. Between the two of them I received two replacement power supplies, five replacement batteries, a replacement hard drive, and three repair jobs. I’ve never had a problem with Apple and their warranties.

8 Kate

You said pretty much exactly what I was going to say!

My Apple laptop is seven years old now, and it’s still going strong. I got 4 years of AppleCare when I bought my laptop, and after that, they started comping me fixes because virtually nobody keeps their laptops for so long! They’ve rebuilt my hard drive (it got power surged while still under AppleCare), given me a new battery (it died 6 years in), and just this weekend, got a free operating system for it (you can’t buy them for my computer any more, and since I got a refurbished iPod Touch, I needed to update).

The real benefit to them, in my case, is not the money they make off the AppleCare (it LONG ago paid for itself), but that after such good service from them, I am *highly* unlikely to go elsewhere for a new laptop when this one finally kicks it.

9 Jessie's Money

I’m not a fan of extended warranties at all!

10 LG

I agree with others that it depends on the product and the warranty offered. I got my MacBook 3.5-4 years ago and I got the store’s warranty (not Apple’ss). Well, between it and the regular Apple warranty (which for some things lasts for the life of my computer), I’ve been covered for many a thing that has gone wrong: hard drive crashed, which was covered under the store warranty and the Apple warranty has covered the case breaking several times (just out of regular use). The store warranty is a great one, as they covered anything and everything that could go wrong. I could accidentally toss it off my balcony and it would be covered. And when it came time to actually use the warranty, I had no problems at all.

A great option that I’ve gotten with some warranties is if they are bought and not used, you get the equivalent worth (or a percentage) in store credit. So whether you use it or not, there’s a good chance you’ll get your money back or most of it in some other goods. We got this deal for our TV, which thankfully has been working well so far. *knock on wood* I’m guessing the store/company makes their money by the many people who forget this and don’t bother to go back in 2-3 years to redeem it, but I’m a bit anal about these things!

11 Ryan@TheFinancialStudent

It’s also good to know that items purchased with a credit card usually have their standard warranties doubled.

12 Alice

I buy my apple products at best buy because they have a better warranty. The computer I bought was covered under their 3 year accidental damage warranty. Awesome if you live with roommates (or children). It covered damage if someone drops your computer, spills something on it or as my roommate did steps on it. Only thing it doesn’t cover is theft. Best money I ever spent. They have fixed my computer twice in the first three years, gave me a new computer when the first one broke after more than two years, less than 3. I bought another warranty and they fixed the computer when the roommate stepped on it, replaced some issues right before the warranty ran out this fall. All for no additional cost. Yeah! Go Best Buy. Once you go Mac you never go back. Ha ha ha. However, I would not buy the extended warranty for an IPOD since those seem to break only after two years.

13 Stephanie

The only extended warranty I ever bought was for my car, and it paid out after 2 wheel bearings and one caliper went (over a 6 year period). I tend to shun them, but I figured I was already laying out a good sum for my car and I might as well be safe…who knew I’d actually need it! It also made sense because of how much I was driving at the time…I’d have been out of warranty w/in a year and a half based on mileage, and the first bearing went after 2.5.

14 Mysti

We got an extended warranty on our tv in 2007. Two months before the warranty expired, the sound card died. We were able to get it replaced for no charge. The warranty was $149, I think. If we didn’t have it, the tv would have been dead and needed to be replaced (the sound card, plus labor, plus blah blah blah would have been slightly less than getting a new tv)

15 spiffikins

I can think of 2 times when an ‘extended’ warranty turned out to be a Good Thing.

My mom bought a used car – and purchased an extended warranty from the dealership for an extra $500. 6 months later, the car ended up needing something replaced/repaired (don’t recall offhand what it was now, this was 15 years ago) – the bill would have been something in the neighbourhood of $4000 – all covered by her extended warranty.

I recently bought a house – built in 1979. All of the appliances that came with the house are at least 10 years old. My agent purchased a one year home warranty for me – I was a bit suspicious, because I figured it wouldn’t be worth much. A few weeks ago, my stove broke down – I called up, they sent someone out to look at not only that, but also fix my dishwasher that had stopped draining, and look at the microwave that’s having issues with it’s role as a hood fan.

$55 “service call fee” – fixed the dishwasher on the first visit. Ordered parts and fixed the stove a couple days later. And the microwave has been deemed “not worth fixing” – so I’m in the process of selecting a new one that they will buy for me and install.

I had to buy a fridge, washer and dryer for the new house. I skipped the extended warranty on everything else, but *did* pay the extra $79 for additional years on the washer, since every review I looked at for HE washers seems to indicate that these things are *not* terribly long-lived – lots of computerized bits that go bad and are very expensive to fix.

But on computers, tv’s, dvd players etc – electronics – I wouldn’t touch an extended warranty.

16 Angie

We usually don’t get extended warranties. The one exception was our new front loading washer/dryer. We got the store’s extended warranty (I think it cost about $250) for 5 years, and if we don’t use the warranty, the store will give us 50% back in store credit. Our neighbor had the motherboard on hers go out after 4 years, and she spent major bank getting it replaced, so we figure the peace of mind was worth the money.

17 laura

Just the other day I was in with the Geek Squad, because my laptop’s been shutting off without warning; when they told me I still had a new battery up for grabs under the equipment part of the plan, I could’ve kissed the man, thinking “thank goodness I had the plan!”. It was pretty relieving.

Except, the thing is, the last time I’d brought it in for power issues, instead of fixing the hardware, they shipped a new ac adapter out to me, which was totally loose and came unplugged all the time – killing my battery. I’m pretty sure you can buy an adapter for $35 or so, and I know a battery is around $90 – nowhere near the $275 I paid for the plan.

Not worth it. I should’ve put the $275 away so I’d be more able to afford an upgrade – because seriously, who wants the same computer for more than 3 years these days, anyway?

18 modernhamlet

Extended warranties are a scam. Plain and simple.

19 Melissa

Hey ninja: Just wanted to put my two cents in. I bought AppleCare for my MacBook when I purchased it back in 2006 and oh man, am I glad I did. It has paid for itself probably ten times over, and whenever I recommend a friend buy a Mac, I DEMAND they also buy AppleCare. Seriously, so worth it. Granted, I think I used my MacBook a lot harder than most, but I also really made a point of using AppleCare, so I took it in for problem that, had I not had the warranty, I probably wouldn’t have. So far I’ve had a harddrive, disc drive, casing (twice), screen, battery and AC adapter, and fan replaced, plus a few other minor things. Also, I have an iMac as well, and the harddrive failed a month after my AppleCare expired. They covered it anyway, so that one thing ($500 in parts and labour) paid for the cost of AppleCare for that computer — twice.

That said, I also have an iPhone, and I didn’t buy the extended warranty. I figured, if something happened to it after the year-long warranty was up, I would more than likely already be jonesing for a new phone anyway (and ready to convince my cell phone provider to sell me one at the discounted rate). I also didn’t buy an extended warranty for my TV, either, because it came with a two-year warranty, and it was a good brand, and really, like you said, it’s not going to just spontaneously combust. So yeah, it depends on the product, but I definitely don’t think extended warranties are always a rip off. If anything, it was a poor financial move on Apple’s part to sell me one in the first place!

20 MyMoneyMess

Extended warranties are cash cows for the companies that provide them and bit wastes of money for consumers. The sales pitch sounds great. “If you buy this warranty and something, anything, happens to your phone, it will be replaced for free.”

A year and a half later, “I need my phone replaced, my new puppy got hold of it and, well, it’s toast.”

Company rep: “I’m sorry sir, your warranty doesn’t cover your phone being eaten by a dog.”

I never pay for those extended warranties. I paid for a couple of them early on in my adult life and later realized they were money down the drain.

21 Josie

Sometimes we get the extended warranties, sometimes we don’t. The only one we’ve used it on is our Xbox 360. We had purchased at Best Buy and bought the 3 year warranty. Well at like 2 years 11 months we got the dreaded red ring of death. Brought it back to Best Buy and got a brand new one. Again, we got the extended 3 year warranty. Wouldn’t you know, at like 2 years this one got the red ring of death. Ha ha. So again, back to Best Buy and we’re now on our 3rd xbox. So in this one case it was worth it.
I should also note we both got Apples extended warranty for our iPhones. That was a waste of money. ha ha.

22 Tom

Microsoft has a (free) three year extended warranty for “Red Ring of Death” errors (at least for the older models – the redesigned S model has a one year warranty) –

http://en.wikipedia.org/wiki/Red_ring_of_death#Response_to_rate_of_failure

Best Buy offers faster turnaround, but the one time I had a RRoD, I sent it to Microsoft and received a new one within a week.

23 Tom

I don’t buy extended warranties, though I have bought insurance on expensive-to-replace items (iPhone, laptop, TV) that covers accidental damage.

24 krantcents

I do not have any extended warranties! Do I wish I had one? No! In most cases, the money you spend for an extended warranty is not worth it. If you will feel better put the money aside that you would spend on an extended warranty.

25 Jeffrey Mitchell

I am just going to comment on the irony that in the “ads by Google” section at the top of the page are ads for Extended Warranties. That is just flat out poetic…you rant about how terrible the product is and the computer doesn’t realize that this might be a bad place to advertise them.

26 Sara

That totally cracks me up about google ads – I was reading a story somewhere about how bad high fructose corn syrup is for our health, really bashing companies for it, and right in the middle of the article was a google ad for that corn refiners association that’s been trying to advertise that HFCS is OK in moderation! Hah!

27 Jenna

I don’t think I own a single thing that I have an extended warranty on, but I tend to shop at stores that have great customer service and support, Apple and REI for example.

28 Sara

“When you buy a warranty you’re betting the product will break. The company offering the warranty, however, is betting it wont.” That sums it up perfectly! I have zero extended warranties, because of the reasons you listed. I always feel like a sucker paying for extra coverage of anything.

29 Will @ HackingTheBank.com

I’ll have to disagree and say that in some cases, extended warranties make sense. Now, I don’t make a habit of buying extended warranties at all. But after losing my last laptop to a coffee spill all over the keyboard I vowed this time that I would get accidental covered. When I purchased my laptop from HP for $1.7k, I was able to get the warranty extended to three years, with next-business-day repair on-site, and accidental damage protection, all for just $99. I think a hundred bucks to make sure that my laptop lasts me three years, no matter what I do to it, is a great investment. If I spill a cup of coffee on this one, it will either be fixed or replaced.

Comparing the Macbook warranty with the HP one I got, yours seems like you got ripped off. You only got one additional year and it didn’t include any accident protection.

30 Michal

I totally agree. Nice post!

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