To Warranty or Not to Warranty?


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Is an extended warranty worth it?

There seem to be two kinds of people in this world: those who buy extended warranties and those who do not. And each side seems to be quite adamant on the subject. And then there’s the few stragglers in between who side mostly one way or the other but will make exceptions. Johnny and I would be considered stragglers.

Nine times out of ten, we say “no” to an extended warranty. I don’t know whether it’s luck or just good products — or a combination of both — but so far we haven’t regretted our warranty decision (knock on wood). But then there’s that 1 in 10 moment when we become outliers on an otherwise predictable graph and buy that darned extended warranty. (Did the terms “outlier” and “graph” make this English nerd sound mathematically competent for a split second? I’d like to think so.)

What are these exceptions based on? Here are a few things we consider when deciding whether an extended warranty is worth the extra money.

How Will the Product Be Used?

Is this a product that will be going into battle, so to speak, on a daily basis? Or will its life be a sedentary one, spent in a location where it’s likely to incur minimal damage? Cell phones are a good example of a product that goes into battle. Mine has been on planes, in bathrooms, on the ground, and in between cushions in every time zone. Our TV, on the other hand, has spent its entire electronic life on a stand in our living room. We don’t have three rowdy boys under the age of seven or any other extenuating circumstances that might jeopardize the TV’s safety. In other words, our phones have warranties, and our TV does not.

What Does the Warranty Cover and What Kind of Brand Is It?

Johnny and I have found that when we buy reliable brands, the warranty is usually not necessary. It makes sense, right? Our last car purchase was a Toyota Corolla with less than 30k miles on it. And while no-frills, its reliability ratings were spectacular. The salesman was insistent that we needed the extended, 5-year warranty, which would be an extra $2000. The warranty only covered major problems, not the day-to-day maintenance expenses. So I called my sister who happened to have two Corollas, and I asked her whether she’d spent $2000 in maintenance on either car over the years. Her response? After 8 years, they had only needed a single major repair on one car that cost about $1200. So we decided the extended warranty wasn’t worth it, both because of what it covered and because of the reliability reports of the car brand we bought.

Another example? Laptops. Go with a cheaper laptop with flaky reliability ratings but with a great warranty? Or get a more expensive laptop known for its reliability, and skip the warranty? I think there can be arguments for each. Or if a product is a first-generation model on the very cutting edge of technology, it’s reliability likely hasn’t yet been tested. A warranty could be a nice safety net.

Maybe a warranty is worth it

Those are our main considerations with warranty buying. That said, I think there are two more things worth noting.

Warranty Buyers’ Mentality

For some consumers, choosing whether to get an extended warranty isn’t about spending the extra money — it’s about the peace of mind. Knowing any one of their can’t-live-without-it electronics could break without causing so much as a hiccup in their day is worth the price every time.

Those who don’t buy warranties may tend to be more careful with their products for the sole reason that they know how much a replacement would cost. On the flip side, those who buy warranties may be less careful for the opposite reason. This mentality could lead to their products getting damaged or broken more often, which would only further validate their decision to buy warranties in the first place.

Self-Insuring

Self-insuring is for those who see the value in warranties but have a hard time putting down the extra dough for them. Rather than pay for an extended warranty, put aside whatever amount a warranty would have cost each time one is offered. Maybe no products will need replacing, but if one or two do, the money will be there for it. The method of self-insuring seems like a surefire way to save money on extended warranties. But I’ll admit, it would take a lot of discipline to actually set aside that money each time.

So, which are you? Are warranties your best friend, or do you see them as just another way to rob the consumer? Or is no one as adamant about warranties as I think they are?

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(Original photo by JonDissed)

 

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21 Comments

  • Reply Brian December 10, 2012 at 11:33 am

    I pretty much avoid warranties like the plague, EXCEPT for Applecare… If I am buying anything from them that has a battery, I get the warranty since that usually costs less than the stupid battery does. Can anyone explain to me how Apple is so bad with batteries?

    • Reply Joanna December 10, 2012 at 12:39 pm

      HA! Speak of the devil… we have a Macbook with a useless battery right this very second!

  • Reply Kyle @ Rather-Be-Shopping.com December 10, 2012 at 12:02 pm

    Excellent post. I am a listener to consumer expert Clark Howard, and he is always preaching that extended warranties are a major money maker for the seller and to stay away, especially on electronics. He always says there are always exception to this rule, but in the long-run the data has shown that extended warranties are a losing proposition for consumers. Only time I have ever bought one is on a new car and I never had to use it.

    • Reply Joanna December 10, 2012 at 12:46 pm

      It seems most financial gurus agree with Clark Howard. But I do have some friends who swear by their warranties like nobody’s business. I’d be interested to see a poll on what the average American thinks?

  • Reply Newlyweds on a Budget December 10, 2012 at 1:25 pm

    We hardly ever get the warranties mostly because there are usually a ton of exceptions, and it seems to be a pain in the butt to handle. I know there have been some statistics floating around about the percent of people who actually use a warranty they buy and its really low.

    • Reply Joanna December 10, 2012 at 2:12 pm

      That’s good to hear. More often than not, I think Johnny and I will continue to throw caution to the wind as far as warranties are concerned. So it’s good to know we most likely won’t get burned from it!

  • Reply John S @ Frugal Rules December 10, 2012 at 1:44 pm

    Good post! We’d probably be classified as stragglers as well. I think that largely they tend to be a rip off, especially these days as many companies outsource them to shady warranty companies. The only one I can think of that we have is on my phone as I’d rather pay the $5/month having the confidence that if of our little hooligans drops it in the toilet that I can go in and get a new one.

    • Reply Joanna December 10, 2012 at 2:16 pm

      The classic cell phone in the toilet… sadly, even without toddlers, my cell phone has dropped in the toilet more than once!

  • Reply Tackling Our Debt December 10, 2012 at 1:50 pm

    When it comes to warranties on small items we look at the way you do. How often will this be used. For example, we have a bread machine that we bought about 5 years ago. Initially we didn’t use it much but in the past 12 months we have used it twice a week. Two weeks ago it stopped mixing and wouldn’t work again. We found the same machine at London Drugs and although it came with a one year warranty, knowing that we use it often, we bought the extended warranty. Other times we skip it. It all depends.

    • Reply Joanna December 10, 2012 at 2:19 pm

      I think you’re smart to evaluate each item on a case-by-case basis. And if you’re using your bread machine twice a week, I assume you’ve always got fresh, homemade bread! Mmmm. Move next door to me and share some of that goodness!

  • Reply Pauline December 10, 2012 at 4:24 pm

    I avoid extended warranties and so far have only had a $150 repair on a washing machine. Because I travel quite a lot it is likely that I won’t be in the country I bought the item by the time it breaks, making it hard to send back. Now I am in Guatemala and everything gets fixed for a fraction of the price so one more reason to skip a warranty.

    • Reply Joanna December 10, 2012 at 5:04 pm

      It sounds like you’ve got it figured out! And cheap repairs? Yes, please!

  • Reply eemusings December 11, 2012 at 12:50 am

    The two big influences in my life – my mother and fiance – are on opposite side of this spectrum!

    I guess I take it on a case by case basis but mostly coming from the default view that a warranty is probably not worth it.

    • Reply Joanna December 11, 2012 at 11:08 am

      Most of our family members have strong opinions either way as well. For the foreseeable future I’m right with you, but who knows if that will change in a few years once we have little toddlers running around breaking things!

  • Reply Lyn @ Pretty Frugal December 11, 2012 at 10:38 pm

    I’m a warranty-buyer… sometimes. I actually did make sure my car was Honda certified when I purchased it a few months ago, and I bought AppleCare for my recently purchased MacBook, but I don’t have a warranty for my TV. As I wrote about in my post about Verizon and my iPhone 4, I sure wish I would have sprung for AppleCare. Though my problem was fixed (after a few hours and a lot of luck), it would have been way less hassle if I could have just taken it to the Apple store and gotten it replaced. Though I hope this replacement lasts for at least another year problem-free (and without my irrationally wanting an upgrade I don’t need) I’ll definitely be buying AppleCare on my next phone.

    • Reply Johnny December 11, 2012 at 11:39 pm

      Those are the two we’ve considered gettings warranties for: car and AppleCare. We passed on the car, but went for AppleCare. It helps that AppleCare has a fantastic reputation, ease of access, and immediate backups waiting to hand you in an Apple store (or shipped next day if you don’t have a store nearby).

      I’m terrible at justifying the new upgrade phones. “But the screen is bigger!!! Everyone will laugh at my .25″-smaller screen!!!”

  • Reply Cait December 25, 2012 at 11:19 pm

    I have only bought one warranty before and I never needed to use it (what a waste!). I should knock on wood before saying this but I don’t think I’ll ever buy another warranty. Most things come with automatic 1-year warranties and that’s good enough for me.

    • Reply Joanna December 26, 2012 at 12:25 pm

      Our only current warranty is AppleCare for our iPhones, and Johnny JUST had to get his entire phone replaced three days ago! But all of our other products are warranty-free, and so far so good!

  • Reply Warrantech July 25, 2013 at 12:43 am

    well I think for expensive things like cars consumer products and gadgets you should purchase extended warranty to make your self relaxed from the cost of repair and maintenance

  • Reply heather August 28, 2013 at 1:22 pm

    Maybe I just have the worst luck, but we bought a house 4 years ago and have since had to replace every single appliance. And in that time frame every single new appliance has broken down. The only thing we did not get a warranty for was the microwave, and it has broken twice. The first time I managed to fix it on my own, and the second time the plate stopped rotating, which I just ignore. It is not worth it right now. Our washing machine is 3 years old now and Sears sent us a letter offering to extend our warranty for a given amount… I am really debating if this is worth it. The first repair that had do be done (less than a year ago) was actually related to improper installment, but the extended coverage took care of everything and saved me some money. Do appliances just break down these days or am I too hard on them??? I don’t feel that I over use anything. Normal use, 3-5 loads a week on the washer and dryer. Dishes every other day. Microwave as needed… Everything has broken at least once. When we bought the appliances we did a lot of research and consistently bought middle quality goods. Not too cheap, not too expensive. Based on this experience, I guess I firmly believe in the warranty. Not that I want to or think that it should be necessary, it is just that appliances do not seem to work very well these days. That is my two cents.

    • Reply Johnny September 16, 2013 at 11:41 pm

      And very valuable two cents they are — especially since everything you said regarding use and quality/cost seems to line up with how we do things. We haven’t had to venture too far into the appliance world yet… I think the only real appliance we’ve bought is a microwave and a KitchenAide. So maybe we’ll have a harder time making the warranty decision when the time comes to washers and dryers of the product world. But fingers crossed, our luck sans-warranty will keep going strong.

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