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Old 2004-11-23, 05:01 PM   #1
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Default FAQ - Extended Warranties

Updated 2011.12.05

This question comes up a lot. Should you buy an extended warranty? If you get additional service with the warranty, it may be worthwhile, but in most cases the answer is no.

Based on feedback on this forum and other forums, people are split about 50/50 if warranties are worthwhile on HDTVs. If you feel they are worthwhile, please buy one.

Some premium credit cards will extend your warranty by a year, consider their use.


Be aware that some extended warranties start on purchase date, NOT on the date that the manufacturer's warranty runs out.

A Business Week article discussed these warranties for HDTVs. They found that the companies paid out less than 20% of what they took in. At these margins, you can understand why dealers push warranties so hard. Over the average person's lifetime, he would spend 5-10 times as much on warranties as on repairs. If you're "easy on" your stuff, the savings could be much higher still. If you're "hard on" your stuff, then the answer may be different. Almost any "insurance" is the same. If you can afford the repair, don't buy the insurance.

From a CBC article, here are some relevant quotes:

What we found out was that in most instances the cost of the extended warranty, at the time the product was repaired, exceeded the cost of the repair. In other instances it was a wash.

...we know how many products over a five-year period are apt to either have a serious failure or get repaired. And it's actually very small...

Our expert, Tod Marks, advises people thinking about an extended warranty to save the money and put it into a repair fund just in case.

Consumer Reports says only 12 - 20 per cent of the money paid for extended warranties is ever used to pay for repairs or claims. The other 80 to 88 per cent of money goes into the profit margin of the third-party/manufacturer.
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Last edited by 57; 2005-11-21 at 11:08 AM.
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Old 2005-11-21, 11:06 AM   #2
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A more recent business week article indicated that BB & CC make over 30% of their overall profit on extended warranties. Wal-Mart will be getting into extended warranties on their equipment. They will be charging less than 1/2 and in some cases less than 1/3 the price of BB, CC. Does this tell you anything about the profit margin on extended warranties?

At first I thought Wal-Mart would be "self insuring", however, they are buying the warranties from the same "insurer" as CC & BB. That insurer is also making money.... Need I say more?


Recent Consumer Reports indicated very low failure rates on flat panel (LCD/Plasma) TVs... CR recommend against purchasing an EW. In the long run they are not worth it and if a repair is required, the cost is typically not more than the EW cost.


Plasma and EW discussion:

http://www.digitalhome.ca/forum/showthread.php?t=34023
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Old 2009-02-18, 01:09 PM   #3
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Reply to avoid archive, please ignore.
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