Extended Product Warranties: To Buy or Not to Buy?

this is stuff you should know. And as Chuck just said, it's Josh here and Chuck there, and um we had we were talking earlier about how it's getting to be that time of year again, right, the tis the season time to go. Cut down a perfectly healthy tree, prop it up like some sort of corpse in the corner, Hang things on it, yeah, exactly, decorate it? Yeah, decorate it. Um, shuffle into the malls and turn out our pockets, right,

buy things for your family and friends. Have the endless debate over whether or not Walmart Greater should say Happy Holidays or Merry Christmas? Right, um, and just basically, you know, celebrate another year past of surviving. Right. Um, that's what we do in my house as Christmas is all about the survival of it another year, opening soup cans with

pen knives and you know, good stuff. Yeah, so yeah, I guess with Chuck and I are saying, it's the holiday season, it's upon us, and um, clearly, the one question that always comes to mind for me is should I or should I not buy an extended product warranty? And I know a lot of times our podcasts are

really interesting, um tidbits that you can share. Well, no, this isn't interesting in that way, but I think a lot of people don't know whether or not to purchase them because they're faced all of a sudden at the register and they're kind of in a panic. So yeah, they're trying to help you exactly. This is This is

precisely why we're we're broadcasting this podcast. It is um, it's it's I never knew, and um, what I found out I was happy to know, actually sure, because yeah, it's become like this real high pressure sales pitch and it comes like when you're almost out the door and all of a sudden like, oh, well, of course you want the extended warranty, right, you're right, I don't know, do I write It's like, do you want the apple

pie McDonald's. Yes, all of a sudden, you're thinking, I don't want an apple pie, but I want an apple pie. But I want apple pie. And I gotta say, you know, especially back when it was fried, I always wanted an apple pie. Now they're baked, they're still pretty good. But dude, compared to the fried ones, like, yes, you can still get the fried apple pies a Checkers by the way, looking to get a warranty on the apple pie is

what I want to know. You could maybe, if you, if you, if you should probably not um and and that's actually one of the reasons. There's several. There's several. There's no definitive answer whether should you should or shouldn't get an extended warranty on a product. Sorry to break it to you, we can't just say no. Um And we'll get into some some reasons or some situations where it is a good idea to maybe opt for or

not a good idea. Right, we'll do both. But if you look at it from the law of averages um across the board, it's a bad idea to buy an extended warranty. Just statistically speaking, either the product you have is going to break within the first year, which is covered by the manufacturer's warranty that all items come with. Yeah, um, or it's gonna break after you know, the the extended warranty has lapsed. So either way, it was speaking just on averages, you're going to have just wasted you know,

X amount of dollars for something you've never used. And it's really just an insurance policy, which again is a form of gambling. Right, um and uh. For the most part, an extended warranty is a losing bet. But there are some instances where you might want to stop and say, you know what, sales jerk, I am going to buy that extended warranty. Right, you want to give a well, I mean, first just want to throw out, you know, I'm statman, a quick stat. Americans, uh, spend sixteen billion

dollars a year on warranties, extended warranties. Yeah, that's a lot of dough. I've got another stat for you that's gonna pop your eyes out. Okay, eight percent of that profit. Yeah, only of that sixteen billion spent on warranties is ever shelled out and repairs their replacements, should we Just in the podcast, there's exactly that sounds like your answer, there's a yeah, yeah, that's pretty much the speaking by the numbers. You're a sucker if you buy an extended warranty, but

there's some instances where you're you're not a sucker. Um. And actually another stat for you there, Chuck. Did you know that Circuit City uh one percent of its operating income in two four, as far as securities analysts were concerned, came exclusively from the sale of extended warrant And I think something like, you know, they're going out of business, stud maybe that I should tell you something. Well, the problem is if you're not selling electronics, you're not going

to sell an extended warranty. If you're dependent that dependent on extended warranties, and yeah, you're gonna go under when the electronic sales plummet. Now when do they push it so hard at the registry? You know, Oh yeah, it's a big time UM and Best Buy actually they I think in that same year fifty of their operating income came from extended warranties. Yeah, you know, I'm not allowed to go within a hundred feet of the Best Buy, so they have everything you need. I wouldn't know. My

wife won't allow it. She's she has a complete boycott because you don't know what you're missing. Chuck, they have everything, it's great, But actually best Buy also has extended warranties on absolutely everything. Uh. There is a guy who know a gall I'm sorry, who was writing for Business Week. UM wrote an article on extended warranties that came across and she she said that best Buy sells at four year extended warranty on a Magnifox DVD player that they

sell for thirty. That doesn't make sense. I don't know what Adam Smith would say about it, but famous economist, Oh I know, okay, he's he's one of my hairs, as you're well aware. Right, so we got a little bit. Yeah, we could sit here all day and punch holes in extended warranties and call you a goon if you've ever purchased one. Um, it's to eat his own though. That's kind of our unofficial motto here at stuff you should know. UM, so let's tell them from sometimes when they should right.

One reason I've got for you, Josh, is if it's a high dollar item, if you're gonna spend several thousand dollars on on an item like let's say, you know, a big flat screen or something like that. Uh, it may be worth a couple of hundred bucks to to cover it a little longer. Yeah, because I mean you've already showed out several thousand what's the what's the harm? And um this this actually comes into play most often with rear projection TVs, which you can run into several

thousands of dollars um. And apparently the typical rear projected projections TV, the bulb used in the projector um is rated for about five thousand hours of use, and if you buy an extended warranty, if you're an average American, you're gonna watch more than five thousand hours of on

that TV within that three year period. It is, but yeah, I think it's just you know, speaking on averages and statistically you're gonna watch that much in three years, so if when that bulb finally goes out, you'll be covered. So that's that is a specific instance where it's a pretty good idea to go ahead and chill out an

extra four dollars. I know, if you have a PC laptop or home PC might also be a good opportunity to buy one because I think there's a thirty seven percent chance that it's gonna need repair within that three year period. Yeah, and actually PC's rank at the top for the for um needing the percentage that they'll need to repair in three year And it's not cheap to

get it fixed either. That's something else you have a consider. No, and um, those things usually come with tech support, which I think Apple, uh their tech support after uh, you know they're manufacturers, one year warranty goes away. Those each call goes up to like forty or forty nine dollars and that's pretty much industry why they're expensive phone calls.

So yeah, well they're coming straight to India. So imagine exactly did you know that there's a McDonald's in Massachusetts where the drive through you're actually speaking to a call center in Colorado. You're kidding, no, kid, you not. They outsourced the order taking and then the people type it in on a computer screen and then back at the at the Massachusetts McDonald's, UM, your orders filled. That's what

they call tangential, right. Yeah, So okay, let's let's get back to uh times when you should get an extended warranty cell phones you know you mentioned was a good one because they're easily breakable or lost. Yeah, if if you are absent minded, if you lose stuff a lot, you probably want to spring for some sort of extended warranties, specifically with the cell phone. Right. Um, A lot of extended warranties won't cover uh loss, theft or you know,

accidental damage. They'll usually cover you know, some sort of manufactured defector, uh if the thing died in natural death within this time. Um, But the cell phone warranties are designed specifically for people who lose their phones. So you're gonna pay like five bucks a month extra, and then you're gonna be slept with the deductible when you know, call it in. But say it's a four BlackBerry and you're you're deductibles a D five, you're still gonna pay

less than you would forgetting that BlackBerry. Right, So it's kind of up to you to do the math and to look at yourself in the mirror and determine if you're one of those people exactly forget some loses and breaks, and that's our advice to you. Um, don't go into a store to buy a cell phone or rear projection TV or anything else. Um without doing some homework first find out if it will break within within that time. Yeah, yeah, exactly. That's very helpful site. Um, and it's actually worth the

subscription to. There's some really great information on there you can't get unless you're a subscriber, right, Um, So no the product, know yourself, and then when the sales guy says, oh, yes, of course you want the extended warranty, you'll you'll know on the spot yes or no. It's good yourself exactly, and you won't have to second guess yourself if you do. Um. If you do second guess yourself and you didn't get

an extended warranty, but you decide that you want one. Uh. Most states, actually state law says that you've got thirty days to purchase an extended warranty for that price, and I believe most states also give you thirty days to cancel it after you get it. You should probably check

um with your state. I have no idea what state department would would concern themselves with that, but I'm pretty sure if you type and extended warranties into your secretary of state, there you go they I'll bet you that if you type that into your Secretary of State search bar, you're probably gonna come up with something, right, right, I would. I would say, so, okay, So now now you know some instances when it's a good idea, When is it not a good idea? Well, no, I would say it's

a bad idea. Um. First of all, you should look at your credit card. Most credit cards, American Express a master card will automatically ensure your item for an extended period of time upon purchase. The high end Visa master Cards, the more expensive one, well ensure it. But I think all m X cards ensure. Yeah, add an extended warranty on, right, So you may be paying for something, uh that's that's

already covered. And another thing that we failed to mention earlier is because you're automatically covered for a year from the manufacturer, you're paying for three years. It's not three years at the end of that one year. It's three years from the point of purchase. So you're actually paying

for a year that's already covered anyway by the manufacturer's warranty. Right, So it's a three year the scam there, it is a three year extended warranty is actually just a two year extension exactly on top of the warranty that you're getting right. Uh, you also have to pay for shipping that most times both ways. So if you're gonna ship your cell phone to Verizon and then back, you might be spending more money and waiting on your phone. Uh, it might be worth it just to go in and

get another phone and recycle the phone. Yeah, if you are, you know so. So basically, I guess if we were to sum this up, we would say, if you are caught on the spot and asked whether you want an extended warranty, uh, and you can't make up your mind, go with no. If you decide that you do want one, actually purchase from the manufacturer. You don't want to purchase an extended warranty UM from a retailer sorry big box

electronic stores. UM, because they basically take out insurance policies on each warranty and pocket a substantial amount of the money you've just given them. Um. The manufacturer's warranty should be a lot cheaper, and you're there's no middleman for you to ship too. You can just deal directly with the manufacturers. Plus you have thirty days to consider it, so don't jump on the spot. You know this Christmas season, remember the reason for this season, knowing whether or not

you should purchase an extended warranty. Right, I had a real bad experience with one recently, so let's hear it. Well, I'll just I'll just do it quickly here. Uh. You typically never buy them, because I think it's a little bit of a sucker's bet. But I bought a kind of a high end washer and dryer from a store. Can I mention our producer, Jerry is saying, shaking her head, no, so we will not. We will not mention the big box appliant store that I bought it from. But we

bought the warranty. Uh. The washer broke and it took seven visits, seven separate visits that I had to take off time, seven times from work. Wrong parts were ordered. Basically, the problem was the company that they had contracted to fix it and was awful, and this big box appliance store. Their argument was take it up with them. My argument right back to them is since you don't give me a choice of who to use, then they are you essentially right. And they didn't see it that way and

they it's basically just quit returning my calls. I fixed it myself and they quit returning my calls. So yeah, so what did you do? Burn the store down? Anything? No, I'm gonna go in and try and get my money back on the warranty at some point, but I will never shop there again. And I've tried to spread the word even though I can't do it. And there you go. Listeners, now you know what store to avoid, apparently, big box

electronics store. If you see one with that sign hanging out front, stay away, but stick around because it's time for listener mail, right, Chuck, that's right? Okay, So Chuck, I get to read this one. This one's from a guy named Alexander. This is complimentary, which makes me feel good. It is very complimentary. Was only the highest compliment that's ever been paid to this via email via electronic mail, right, uh, Alex writes, soce from Edelborough, Massachusetts, and it's on the

how Prayer You in Works podcasts. Uh. Alex says that he likes our podcast. He appreciated it knowing your love for all things scientific. I thought for sure it was going to be and it was going to be open season on any religious topic, especially prayer healing. But the fair and even discussion of the subject really speaks to your dedication to truth and discovery. I appreciate your discipline and applying the same high standards of research to this

topic despite any of your personal opinions. That's real integrity, and now have an even greater respect for your work. That's high praise Chuck. And actually he he says that he's a Christian scientist, and he gives the extra kudos to you for knowing their preferred method of treatment and how the results would be different than prayer plus medical procedure. So way to go, Chuck, Way to go to both of us. Yeah it made me feel good. Yeah, you

should feel good, Chuck. We try and be fair and balance. Forget Fox News. This is where it's fair and balance exactly. Yeah. So if you want to let Chuck no, you know, give him extra kudos. Let us know we're fair and balanced. Tell us that you hate us because we are against big box consumer electronics stores. Send us an email to Stuff podcast at how stuff Works dot c o M for more on this and thousands of other topics. Is it how stuff works dot com? H brought to you

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