Learning the Warranty Odds

Sunday, October 18th, 2009 (No comments yet)

Extended warranties are usually 20% to 50% of the product's price.

Quick survey of plan prices from various stores

Purchase of one must be made after very careful consideration where you weigh the benefits, the cost, and most importantly, the chances that you will use the warranty.

Playing the odds

The key to getting your money's worth is to play the odds. What if you legitimately never see a problem during the entire warranty period? How likely is it to suffer from a covered problem? What kinds of coverage and exclusions are there? Read on to learn what to look for to put the odds in your favor.

First, how long is it? I have personally never been able to use a warranty that was 2 years or shorter.

Portable CD players are more likely to be droppped, stolen, lost, sat on, or crushed in a gym bag than they are to break due to normal wear. Telephones, even the ones with all the fancy features, typically never have problems in less than two years. When was the last time you replace your phone? Game systems, including controllers last for many years.

Plan less than 3 years? Don't bother.
The earliest I've ever had trouble with a game system controller was over two years and even then, I was able to get a cheap replacement with better features than the original.

My recommendation is to never buy plans that are less than 3 years unless you know that the power lines in your area will fry your product before the 2 years is up (most warranty plans cover surge damage)

Note that in rare cases, you will be offered lifetime warranties (for me, it was headlights and spark plug cables on my car). These are a great deal, but only if the terms are good and if you keep the item long enough to use the warranty.
Do you use it much? What if it spends most of it's time in a closet or on a shelf? Warranties in these cases are largely wasted.
If, on the other hand, you bought a laptop for school and take it to every class, use it between classes, during lunch, at home, at the airport when flying home to visit relatives, etc., chances are you'll more likely use it.

The situation I just described is how I use my laptop except that I also use it as a portable DVD player, do all my site design and articles on it, and use it side-by-side with my main computer to do research. Because of the constant use, and the large number of enviroments I use it in, my warranty definitely worked. I've had the power adaptor replaced (twice), the video card replaced, and have someone sheduled to fix the joints on my screen.
What brand is it? Better brands break down far less often. However, buying a lower quality brand can work to your advantage as shown in this example:

Back in 2001, my laptop choices were between a Sony and an HP. I knew the Sony was better quality and had a better software package, but I hated the keyboard arrangement and the HP had cool blue lights on it and a mute button (which was very useful when the laptop made loud start-up noises during class).

Since I wanted the warranty anyway for the heavy use I knew I'd put it through, the lower quality worked to my advantage. It was practically guaranteed that something would break in the warranty period.
It comes with free maintenance, but will you use it? Will you actually bring it in for maintenance or only when it's not working right?

If you are the type of person to get regular maintenance done, this will almost always guarantee that you'll get your money's worth, but if you're like most people, you won't take the time to bring it in even though the service is free.

If you have it, but don't use it, it's the same as not having it. Don't let the salespeople tell you otherwise!
Does it cover performance? Many current plans (service plans, NOT replacement plans) cover performance. This greatly increases your odds of getting service.

If something breaks, it's usually (though not always), easy to use your warranty. But if it develops an irritating problem (like buttons that have become intermittently non-functional), a regular warranty might lead to trouble if they determine that it was normal wear and tear and not manufacturer defect. Performance coverage pretty much eliminates this problem since it doesn't have to break, only perform poorly.

The following are real life examples of performance problems that I have been able to get service for:
- My TV had a feature that adjusted it's brightness by the brightness in the room. The sensor was malfunctioning and changing screen brightness randomly when we watched movies.
- The bottom quarter of my laptop's computer screen was so washed out that I couldn't see grid lines in spreadsheets.
- My digital camera started responding slowly and took blurry photos.
- My printer started crumpling papers in the upper corner.
- Every third or fourth time I put a video into the VCR, the machine spit it right back out again. It would work, but I had to put effort into it.
At the service counter, I've often been asked, "did it always do this?" As dumb as this question sounds, what they're getting at is that lower quality products might have always acted in less-than acceptable ways.

They have no obligation to repair or replace a problem that's due to a lousy brand. If they ask, simply say "No. It never had this problem before."

Battery coverage almost guarantees you'll get your monty's worth out of a warranty

Does it cover the battery? For certain products, this shifts the odds dramatically in your favor. Most rechargable batteries last under 2 to 3 years with consistant use.

Note! If your plan is not performance based, the battery coverage probably won't matter. Even after over 6 years, my camcorder batter holds a charge… but only for 5 minutes.

My friend Chris bought a Sony laptop around the same time I bought my HP (he didn't like the cool blue lights like I did) and after a while, had trouble with his battery. Would it surprise you to know that Sony brand batteries cost $250 to replace? Guess how much his service plan was.

Granted, most laptop batteries aren't expensive enough that a single replacement covers your warranty cost, but most start at about $120.

When I bought my most recent digital camera, it was hard to buy a $99 service plan on it, but it was a 4 year plan. At the time, I figured that a replacement battery pack for my camera is $70. The plan is $99. Since I know that I will get a free battery in the next 4 years and the price of batteries doesn't tend to drop, the plan is really only costing me about $20.

In the end, as of the time of writing this article, I have about 6 months left on the plan, but I've taken it in for repair at least twice. Once for the camera itself and once for the stock lens which started having auto-focus issues.

It is open, used, or a display item? Generally, you have a higher risk of something going wrong or being broken already. However, if you were considering the warranty anyway, this works to your advantage. The store will discount the item because it's not new and if anything goes wrong soon, you have the warranty to fall back on.
Coverage starts after the regular warranty? This doesn't work as well as you might think
Does the full coverage start now? Plans that begin after the manufacturer's warranty can have unexpected problems:
- If it breaks in the first year and the manufacturer refuses to fix it, does your store warranty also become void. If not, do you have to wait until the warranty expires before you can use your store warranty?
- What about warranties where the parts are covered for a year, but the labor is only covered for 3 months? Does the extended warranty make up the difference? Will they cover you when the manufacturer doesn't?
Try to buy from stores that will let you bring an item back to the store for service during the entire warranty period

Can you bring it back to the store for service? Some manufacturers are difficult to deal with and may charge you for shipping. Look for a plan where you can just bring it to the store and have them deal with it.

A secondary advantage to this approach is that the store may keep records of the service and repairs for you which is very useful if you're not too good at keeping paperwork.

Note that service plans almost always require that you keep the original reciept and copies of any service repairs and won't guarantee that they have them on record. If it's easier, scan copies into your computer and file them physically for double protection.
Do you have to keep the original box, accessories, or receipt? A good warranty won't require anything but the receipt, but even then, better stores keep track of your purchase and prior service in their computers.
How long to repair? Are repair times guaranteed to be reasonable? What if it's your work laptop and they can keep it for up to a month? If you can't tolerate the downtime, perhaps saving your money on the warranty and buying a new product is your better solution (not one everyone can do, but I've seen plenty of businesses take this approach).
How many times can it be repaired? Most warranties have some kind of extended no-lemon policy that limit the number of times the product can be repaired before they have to replace it.

Watch out if the warranty doesn't use the words "same or different problems" in the no-lemon section. A warranty that reads this way limits the total number of your repairs to a specific number.
Is it transferrable or refundable? You want to be able to give/sell the product to someone and have the warranty go with it, or be able to get a partial refund of it's value.

In my experience, you will get more money by selling the product with warranty coverage than by refunding the plan. Who really wants to buy a second-hand laptop with no guarantees? If you don't get your warranty's worth any other way, consider selling the product while there's still 6 months of warranty coverage left to get the best value.