Margins on television extended warranties

[coldcanuck]

I noticed this little blurb on my Future Shop bill in which I bought a Samsung 64" D8000 series plasma:



I find it interesting that it states that 31% of the sum goes to American Bankers Insurance Company of Florida. Does this imply that 69% of the service plan purchase price goes to Future Shop? Given what people say about consumer electronics merchants making most of their money on selling service plans, I wouldn't be surprised at the high margins.

Anyone with insight, and further, on why FS would post this information on my invoice?

BigBadandUgly

[PG44]

I don't doubt their profit margin is high either, but I also notice their "extended warranty" overlaps the manufacturer's warranty rather than actually extending the coverage period. This is either misleading advertising or fraud IMHO. I am covered by the manufacturer's warranty for the first year so why do I need to pay for the extended warranty from the time of purchase?

[okeefe73]

Definitely huge margins on these extended warranties. I totally agree with PG44. First year warranty is covered by the manufacturer, and if you put it on a credit card that has the extended warranty feature on it, then it usually doubles the manufacturer's warranty up to one year.

I bought the FS extended warranty once, but won't do so in the future. Use it as a negotiating tool at the time of purchase. Does FS offer the option to cancel the warranty within a certain number of days?

[hugh]

Does this imply that 69% of the service plan purchase price goes to Future Shop?

Probably. Back when I wrote about extended warranties and televisions, retailers often made more on the warranty than the television.

[57]

EW FAQ discusses the huge margins on EWs and the fact that EWs are not recommended for most items.

http://www.digitalhome.ca/forum/showthread.php?t=17872

[spuggy68]

The part that burns me about these warranties is that if you buy a 3 year extended warranty they always start at the beginning, so really your paying for a 2 year warranty. Technically most of these warranties, the manufacturer is never involved again because any claim is with the Extended warranty company and not the manufacturer.

[coldcanuck]

Originally Posted by okeefe73

Does FS offer the option to cancel the warranty within a certain number of days?

Yes. I purchased my last Panasonic plasma TV in 2007. I wanted a better price on the PSP (note that they are cleverly called "service plans", not warranties) so they knocked some more money off the price of the TV and left the warranty at MSRP. I thought this was kinda strange, but I figured out it was because the commission on the warranty is higher.

Two days later I had buyers remorse (for the warranty, not the TV) and returned the warranty but they didn't adjust the selling price of the TV upwards.

When I bought my recent 60" Panny that I had so many problems with, FS was offering a special - installation for $100, reduced from $250. I took it given the size of the TV and the hassles of me and my two little daughters installing it on the wall. I didn't realize it at the time, but at the time of purchase the invoice reflected installation at $250 and the TV was marked down an additional $150. Obviously because the install paid greater commission.

Well, the TV was damaged so I cancelled the install and as events worked out, we did it ourselves. So I returned the installation and they reimbursed me the full $250, no questions asked.

Before the accusations begin - No, I do not feel guilty of fraud. In both cases I legitimately bought the product and upon turn, I wasn't expecting to get anymore back that I had negotiated when I paid. It's not my fault the way they conduct their internal business.

Originally Posted by spuggy68

The part that burns me about these warranties is that if you buy a 3 year extended warranty they always start at the beginning, so really your paying for a 2 year warranty.

I did some research on the AVSforum last night and there are a few third-party companies that you can buy a service plan from. I read the documents of one and it clearly specifies that the manufacturer's warranty covers the product as long as it is in effect. I'm sure most Future Shop warranties stipulate that if you actually read it through.

Originally Posted by spuggy68

Technically most of these warranties, the manufacturer is never involved again because any claim is with the Extended warranty company and not the manufacturer.

That's why they are referred to as service plans and not warranties. I'm sure warranties have some legal context associated with them. For example, perhaps you can't warranty a product if you're not the legal manufacturer of the product.

[Geo35]

The price of HDTV sets has come down so dramatically over the past few years that in most cases the 1 year manufacturer (+ one year credit card warranty extension) is good enough. After 2-3 years the equivalent new set may be worth half as much as the original set purchase price anyway.

[okeefe73]

In my research to purchasing a Panny, Panasonic themselves offer extended warranty. And it's something that you can purchase anytime up to the 1 year mark of the original warranty.

Spoke to an agent and for the TCP65VT30 that I'm looking at, it would cost $399.98 + taxes for 2 additional years. Something definitely to consider when making your purchase decision. Cheaper than the retailers' own 4 year "service plans".

I'm not sure if I would get it still, since I would take advantage of the credit card extended warranty.

There are also dealers that will include the extended warranty as well. So when negotiating and making your purchasing decision, you should factor in that value as well.