If the product you buy has a warranty, take advantage of it!
In the past year I have had several products that I purchased fail, have problems or otherwise meet their early demise. Here are my products that had issues:
- Xbox 360 – hardware failure
- Canon Digital Camera – memory reader failure
- Canon Digital Camera (Again) – imaging chip failure
- New 32″ Insignia LCD TV – motherboard failure
When you have products that have problems like I did, make sure to look up the specific issues on the company’s support site, and see if your problem is a known issue, and whether it is covered under the warranty. In many cases it will be covered and will be fixed free of charge. You can save a ton of money, just by checking!
Getting my problems fixed
Some of the miscellaneous problems I had fixed this year:
- The Xbox 360 has been notorious for having hardware failures, with multitudes of people complaining of the Red Ring of Death console problems. I didn’t think I’d be unfortunate enough to have these same problems, but I was. A couple of weeks ago when I turned my console on to watch a movie, the light on the unit just blinked red. It would not output video. Fortunately Microsoft has extended the warranty on this known issue, and after doing some research I realized that I was covered under the warranty. I mailed the console in at their expense, and within a week or so I had a “new” refurbished console in my hands ready to go. If I hadn’t checked into having the console fixed under warranty I probably would have had to purchase a completely new console at around $300. Money saved by having the item fixed under warranty? $300
- My Canon S400 digital camera also had issues in the past year and a half… TWICE! The first time I would put a compact flash memory card into the camera, and it would spit out an error message. It turns out that it was a known hardware issue, and was fixed free of charge. Money saved by having the item fixed under warranty? About $200.
- A few months later my Canon camera once again started having problems. This time the screen and all images were displaying a purplish hue, and there was some distortion on the photos as well. After checking, this was a known issue with several models of Canon cameras, and the company was fixing the problem for customers free of charge. I sent it in and was sent my fixed camera a week later. Money saved by having the item fixed under warranty? Once again, about $200.
- Earlier this year we bought a new 32″ LCD TV for our living room when our old tv gave up the ghost. We shopped around, used coupons and got a very good deal on the TV – or so we thought. One day the TV started having problems. It would just randomly turn itself off, and then back on when we were watching. Turns out the issue was covered under warranty, and Best Buy replaced the TV’s motherboard free of charge in our home. Money saved by getting it fixed under warranty? $550.
It doesn’t pay to buy an extended warranty
While it is a great idea to take advantage of the manufacturer’s warranty on the products you buy, it hardly ever pays to buy an extended warranty. Consumer Reports says an extended warranty usually “amounts to expensive and unnecessary insurance.” Here are some reasons why:
- Extended warranties usually cost more than they’re worth: Before you buy an extended warranty sit down and consider the replacement cost of the item you’re purchasing. Often it doesn’t make any monetary sense. Instead of buying an extended warranty, self insure yourself against product failure by saving a little bit of money each month to replace your product in case it dies.
- The warranty may not cover what you think it does: Often the warranty has exclusions that mean things you think you’re covering, aren’t actually covered. Some parts will be covered, others won’t. Or sometimes repairs will only be done so many times, or until the value of the item is exceeded. Check the fine print of any warranty you purchase.
- Warranties are a big store profit center: According to consumeraffairs.com Industry sources put the profit margin on consumer electronics extended warranties at between 40 percent and 80 percent. That just goes to show that more often than not people are not using their warranties.
- Duplicate Coverage: Sometimes the things you’re buying the warranty for are already covered under the product’s manufacturer’s warranty. Double check to make sure.
- Product breakdown trends: Trends have shown that if a product is going to have a problem, it will usually have that problem within the first year, or in the last years of service. During the first year most products are covered by the manufacturer’s warranty anyway. During the last years of service usually even the extended warranty has expired, and you’re probably going to want a newer item anyway.
So there are some of the reasons that I don’t buy extended warranties. Find some more reasons and opinions at these links:
Should you buy an extended warranty?
Parade Magazine looks at extended warranties
Why you don’t need an extended warranty
What has been your experience in using your manufacturer’s warranty? Have you purchased an extended warranty, and if so, were you glad you did?
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Obviously you’re talking about extended warranties for consumer electronics, but our extended warranty for our Jetta paid itself off and then some when our transmission went wonky. The guy at the transmission place said that for VWs the extended warranties pay themselves off more often than not. I haven’t done any research to verify that claim. All I know is our warranty cost something like 1200 and the transmission rebuild/replace would have cost us somewhere around $5000.
I will also admit that when we first had the warranty we were unhappy with it as it didn’t cover some of the minor issues with the car that we had fixed that we thought it should cover.
Matts last blog post..Seminary Woods [2]
Most repairs that you will have to do for the first few years in the lifespan of a new car are going to fall under the routine maintenance category (tires, brakes, etc) and won’t be covered by any extended warranty anyway.
On the other hand, any serious problem with a major component such as a blown transmission like yours, will be covered by the manufacturer’s warranty. So for most people the extended warranty is most likely just going to be wasted money.
Warranties are a huge profit center for auto dealers -for a reason – most people don’t need them, and don’t use them. And the warranties often have tons of exclusions. Be very careful when purchasing one of these policies..
I agree that generally extended warranties are not worth it. However, it is smart to take advantage of the manufacturer’s warranty on products.
In our “microwave society”, we often want things done immediately and without hassle. We tend to throw it out and get a new one. We neglect to realize that getting things fixed is a real option. Thanks for reminding us!
Additionally, if you use a credit card it may extend your manufacturer’s warranty an additional year. For example, my AMEX Blue Cash automatically extends the warranty an additional year. Kind of cool, but you’ve got to remember to keep up with the information.
Good point on the credit cards extending your warranty – definitely something everyone should check out! After checking into it tonight, I found that my credit card DOES have warranty extension available. Also, i found that items that are stolen within 90 days of being purchased might also be covered by the credit card as long as you have a police report. Wish I had known that before!
Here’s the problem with extended warranties. When you buy an extended warranty, you not only have to pay the cost to insure the item, but you also have to pay for marketing cost, a commission to the sales person, and additional profit margin for the issuer. Consumer reports even tells us that about 85% of the money we pay for an extended warranty goes to commissions and profit for the issuer, only 15% of the money you pay in is going toward the cost of insurance. In essence, you are paying six times the amount of the average amount of repairs the device or item you have purchased you need. It just doesn’t make sense mathematically.
Sam
Fix My Personal Finance
http://fixmypersonalfinance.com
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