Extended warranties remain a hot topic

Two weeks ago, around the time our special report on extended warranties was released, Consumers Union’s Public Policy & Advocacy Office (for the uninitiated, Consumers Union is the publisher of Consumer Reports) sent a few questions to their list of E-activists (425,000 people who regularly receive Consumers Union emails on timely advocacy topics), asking them about their extended warranty experiences and attitudes. As of earlier this week, over 5,100 E-activists had gotten back to us. Their take is interesting and illustrative of the wide difference of opinion people have about extended warranties. And they come with a pretty big disclaimer: Take the results with a large grain of salt. They’re not scientific or subject to any sort of rigor. It’s not a survey nor does it even rise to the level of a poll. Our Advocacy folks simply wanted to get a sense of what a select group of people are thinking.

Not surprisingly, the answers reflect a split in public opinion about extended warranties, despite persuasive evidence that they usually don’t pay off. (Even many of us on the inside here at Consumer Reports have been tempted from time to time because the sales pitches sounded too good to pass up. We won’t name names, but you all know who you are.)

Next time temptation strikes, think about the following anecdotes, both pro and con, from those who wanted to share their stories. Most interesting are the comments from people who claim to be current or former retail employees who sold the warranties.

“I used to make an average of $100 a week in cash by selling extended warranties! Sometimes, during Xmas, we would get a party or a night out for the biggest sellers. I won a lot, which I am not proud of. I felt bad selling them to older people on fixed incomes. Today, it is a different world for me. If I worked now, I wouldn't ever let anyone buy one.” – Tustin Ranch, Calif.

“I worked for a company that used them (extended warranties) to bring more money to the bottom line. (They) very rarely benefited the consumer.” – Chula Vista, Calif.

“My manager bought a DVD player from our store (part of a national chain), along with the extended warranty. When her unit died, she followed the instructions to claim her replacement item. Eight e-mails, seven faxes, and at least 10 calls to the help center, and after 3 months, she still didn't have her DVD player. After going up the chain of several supervisors, she finally told them that she was an employee of the company and would take this claim to the vice president. She finally got the replacement item after almost four months of runarounds and aggravation. Needless to say, I don't offer the extended warranties to the customers that come through my checkout lane anymore. It is now my store's policy to ‘make it right’ for the customer whenever they come in with a return”. – Magnolia, Ky.

“I work at a boat dealership, and extended warranties for marine engines make sense. The extended coverage might cost $200 or $300, while a typical major marine repair can easily run $1,000 or $2,000. Our customers who purchase them (warranties) often end up relieved that they did. A standard joke in the boat business, regarding the cost of maintenance is that the word ‘BOAT’ is an acronym for "Bring Out Another Thousand!" – Vancouver, Wash.

“When I bought my riding mower from Sears, I bought the extended warranty for around $299 for 3 years. I had three tires replaced; with the service calls that would have cost over $299. I had a new carburetor put on, and they also included oil changes and other to keep the mower running smoothly. I figure I saved over $600 over those 3 years.” – Fort Myers, Fla.

“We purchased a Maytag Neptune front-loading washer and dryer when they first came on the market. The salesman included in his presentation the fact that other relatively new buyers had leaking problems in the door seal. By virtue of the substantial savings in water and electricity, we made the purchase and included the extended warranty. Two years later, the door seal was bubbling and discolored from mold. The service technician cleaned the soap filler tube and replaced the door seal. Watching what was involved in taking apart the washer made the extended warranty worth the money.” – Menomonee Falls, Wisc.

“I do buy extended warranties, but only after negotiating the price of the warranty to 50 to 60 percent of the original offer price. If the retailer won't budge, I won't buy. I bought an extended (5-year) warranty on a new Canon multi-function printer in 2001, negotiating the warranty price. The unit broke in year four, and I received a brand new in exchange. Of course, there are other warranties that I've bought and not received value from, but I always paid much less than the offer price on the warranty. Consumers have a right to negotiate.” – San Marino, Calif.

“I recently purchased from Best Buy a new DVD/RW drive for my computer. The drive was $49.95. When I was checking out, the clerk chuckled and said, ‘I'm required to ask you this, but it seems rather silly. Would you like to purchase a 3-year extended warranty for $49.95?’ I laughed and declined. ” – Austin, Texas

“Over the years I have purchased two or three extended warranties. Either the product didn't break or I misplaced or forgot the warranty. I don't do it anymore.” – Albany, Calif.

Comments

[Dave]

To purchase an extended warranty you really have to measure and blaance the depreciation of the product over the life of the warranty, the cost per year of coverage, and the complexity and cost of average repairs on the item.

Most consumers are not able to really do that in a matter of 30 seconds at the checkout stand...

Maybe CR should put out a review of when it may be a good decision and when id may not!