The Word on Warranties: Don't Bother

Submitted by Bill St. Clair on Fri, 03 Nov 2006 12:36:57 GMT  <== Computers ==> 

David S. Joachim at The New York Times - those manufacturers extended warranties that give you three years of coverage instead of the usual one year aren't worth it, says Mr. Joachim. [cafe]

Because the insurance market is competitive and policies can be easily compared, insurance companies generally post profits in the 15 percent range, while electronics retailers generate margins as high as 80 percent on warranties, Mr. Housser said. That is a sign that the products they sell rarely break down during the warranty periods, making warranties a great deal for the seller but a bad deal for the buyer.

Indeed, Mr. Housser said, in many cases electronics retailers make almost no profit on the goods they sell; they make almost all of it on the sale of extended warranties. That may explain why salespeople put so much emphasis on warranties during their sales pitches, he and other experts say.


[Todd Marks of Comsumer Reports] calls a warranty on an item like this a "sucker's bet." "You're betting that one, the product will break, and two, that it will break in the second or third year," after a typical manufacturer's warranty expires, Mr. Marks said. "And three, you're betting that the cost of repair or replacement will exceed the cost of the warranty."

Add comment Edit post Add post