A couple of months ago I purchased a new Dell laptop. We’ve needed a new home computer for a while now and the deal I ran across was too good to pass up. So I purchased it for $400 via the Dell website. As an aside, Dell has always been good to us. Their products have performed well and suited our needs for internet, email, blogging, etc. just fine. I’ve also used a Dell for a work computer in the past and was absolutely pleased with the performance and reliability.
A few weeks after receiving my laptop I was contacted by Dell and asked if I wanted to purchase an extended warranty. After kindly and patiently listening to the offer, I gave them my pre-programmed response of “no thank you, no thank you and no thank you.” In fact, I’m used to hearing this question after past purchases of video cameras, digital cameras, TV’s, etc., so in saying no so many times it’s now my default answer as I have my ears half open.
[To provide a little more background, the Dell warranty I was being offered extended my manufacturers warranty by a few more years, if I remember correctly. The cost was about 25% of my purchase price. It covered non-manufacturer problems such as personal accidents. However, since I wasn’t considering the warranty from the beginning of the conversation, I didn’t catch all the details.]
I know this is where electronic stores, in particular, make a lot of money. For example, if you never use your coverage you’ve wasted the cost of the extended warranty. However, if you do use the coverage, the price you pay may be cheaper than the replacement cost of the product, or repair costs the manufacturer, or a local repair shop will charge you.
Should I have bought the warranty? The unthinkable occurs.
Well, a couple of months after having my laptop the unthinkable occurred. I accidentally knocked over a cup of coffee directly onto the keyboard. While at first I didn’t think the laptop was damaged (I quickly turned it upside down to drain out the coffee), it got progressively worse over a few days as the touch pad stopped working, the keyboard malfunctioned and finally, it wouldn’t boot up anymore.
I suppose my incident might be on the rare side. I would imagine the majority of people don’t have an accident such as this in the first few months of using their new laptop. When I contacted Dell to discover my options, I was told my 1 year warranty didn’t cover the damage because the computer problems were the result of a personal accident (which is understandable).
I was then transferred to another department who handles such cases as mine (the folks who didn’t by the extended warranty). I was told Dell would repair my laptop completely for approximately $250 (remember I paid $400 for it). Of course, they mentioned the extended warranty would have covered the incident and that I should definitely purchase it next time. :)
What did I do?
I figured I had the following choices:
- Try to repair the computer myself
- Find a local repair shop
- Pay Dell the $250 to fix it and ship it back to me within 8-10 business days
- Buy a new computer
- Do nothing
Given I had the emergency savings to cover the cost of the repair, I decided to let Dell fix it. I shipped it off just recently and waiting to get it back (supposedly 8-10 days). I decided in the end I didn’t want to buy a new computer which would have cost me more money. I also didn’t have the know-how to fix it myself, nor the time to investigate how. I felt taking it to a local repair shop was a bit risky as the computer manufacturer was probably best suited to work the issue.
Will I buy an extended warranty next time?
I suppose this incident has gotten me thinking about purchasing extended warranties and if it’s really the right approach. According to Consumer Reports, extended warranties aren’t worth it. In a previous post about extended warranties here at Bible Money Matters, Pete does a good job of covering the 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.
The above reasons make a lot of sense to me and support well why I’ve been against purchasing extended warranties in the past. In fact, I’ve always felt like saving the money in an emergency fund was a better approach versus paying for an extended warranty you may never use.
But to be honest, I wish I would have purchased the extended warranty in this case. Remember, the extended warranty would have cost me around $100 versus the $250 I just paid Dell.
Funny thing, J.D. Roth over at Get Rich Slowly recently posted about how he survived the computer catastrophe of 2010. He said he goes through laptops every few years and plans to purchase extended warranties going forward (against his previous opinion of them).
Items such as laptops can be quite valuable when it comes to using for a business, or even for personal use when using them as you manage your finances and for staying connected with people.
So, what do you think? Was my situation one of those rare occurrences where the warranty may have been a good deal for me, or not? Should I stick to my guns and continue to avoid purchasing extended warranties for all products? Or, for such precious items as a laptop, does an extended warranty make sense?