The one-year warranty on my MacBook Pro expired last week, presenting me with a choice: sign up for an extended warranty or live without it? I’ve never been an extended warranty kind of guy. They’re cash cows for the companies that sell them. Anything that is a cash cow for manufacturers and retailers is generally a poor deal for consumers.
According to the Washington Post, $15 billion in warranty premiums were charged to U.S. consumers in 2004, of which $7.5 billion went to the stores who sold them. About $3 billion was paid in claims against plans. Only $20 of every $100 spent on extended warranties was paid in claims.
The current issue of Consumer Reports further notes: “Most products don’t break during the first three or four years of ownership. If breakage does occur, the repair costs is typically similar to the warranty cost.”
What should you do if you want some sort of protection, but don’t want to pay the store? Self-insure. Consider paying yourself the warranty premiums. Reader Steven T. wrote to share this clever technique he uses to insure the things he buys:
I have an ING account. On their site, you can open any number of savings accounts, and you can give a nickname to each one. I created one called the “Warranty Scam Buster”. Anytime I’m faced with the option of getting extra warranty protection on an electronics purchase, I decline, but I write down the amount it would have cost, and then transfer that amount to this savings account. If in the future anything I bought needs to be replaced but isn’t protected, this fund can cover the cost. I’m earning interest on my money, and it’s not getting handed over to some huge company.
If Steven is disciplined and leaves all the money in his Warranty Scam Buster account, he’ll eventually develop a large enough pool to cover almost every problem. A general emergency fund can serve this function, too.
I don’t have a large emergency fund yet. So last week I did something I’ve never done before: I purchased an extended warranty. Because my livelihood depends on my computer’s health, a $349 business expense seemed worth the cost. I’m still not convinced it was the right decision, but it gives me peace of mind. In the future, though, I’ll self-insure with my own Warranty Scam Buster account.
This article is about Hints and Tips, Insurance, Money Hacks
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Applecare does NOT cover accidental damage.
Q: you have to be insane if you think businesses are offering extended warranties because they are thinking of the consumer over profits. if they were thinking of consumers, they would in fact make things that last a long time rather than what is now considered industry standard of 3 year life expectancy of computers (funny how extended warranties are for 3-4 years) and warranty them under a standard warranty for the duration.
It’s also interesting how many computer companies reduced their standard warranties, to include mac, from 1 year to 90 days. it’s not that the company only has confidence the computer will last just 90 days, it is because they can make a nice profit on the extended warranties. companies know that electronics will show problems within the first 30-90 days. Afterward, the likelihood of failure or defect during 3 years is very very low.
People also ignore extended warranties from their credit cards as well as warranty protections under their renter’s or homeowner’s insurance.
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Tim, you seem to have mixed Apple’s warranty details up a bit – AppleCare is one year from the date of purchase, with 90 days of telephone support.
A quick googling shows: http://store.apple.com/Catalog/US/Images/wty-post1997.html
“(“Apple”) warrants this hardware product against defects in materials and workmanship for a period of ONE (1) YEAR from the date of original retail purchase.”
This also applies to iPods:
http://images.apple.com/legal/warranty/docs/ipodisight.pdf
“Apple, as defined below, warrants this hardware product against defects in materials and workmanship under normal use for a period of ONE (1) YEAR from the date of retail purchase by the original end-user purchaser (“Warranty Periodâ€). ”
And iPhone…
http://images.apple.com/legal/warranty/docs/iphone.pdf
“Apple Inc. (“Appleâ€) warrants this Apple-branded hardware product against defects in materials and workmanship under normal use for a period of ONE
(1) YEAR from the date of retail purchase by the original end-user purchaser (“Warranty Periodâ€).”
However, you are correct that is doesn’t cover accidental damage, with a few rare exceptions.
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Someone (or 2) mentioned this previously. Many people fail to realize a major shortcoming of MOST warranties of ANY kind: service. Ask yourself these questions:
1) Will I get the same (or better) service when filing a claim against the warrantor than when I obtain service as a customer paying “full retail” at time of service? If you’re honest (and not naive), then you will very likely answer no.
2) If a covered event occurs, do I have a choice of where I get it serviced or replaced or do I have to use a single (or one of only a couple choices) service provider (who probably won’t offer me “top-tier” service because I’m just a lowly warranty claim)? If you’re honest (and not naive), then you will very likely answer that you have no choice.
Additionally, ask yourself exactly HOW you’re quantifying the value of any warranty. In other words, how do you know that you’ve gotten your money’s worth? For example, I know someone who had an extended warranty for a dryer (it originally cost her about $90). The service tech (from the service company who was contracted by the warrantor) arrived and troubleshooted her complaint/problem. He found (accurately) that the problem was due to an external (i.e. customer premises) factor and, therefore, not a covered incident. Total time that he spent at her premises: 15 minutes. He left a “receipt” that showed the “value” of today’s service as $135.00. She showed me this and I called this service provider directly (i.e. not as a warranted customer) and requested a price for them to send out a tech to troubleshoot a dryer problem (I gave them same explanation of symptoms that she had with her dryer). They quoted me $70 flat rate just to come out and diagnose. Soooo…$135 minus $70 equals…$65. So, the warrantor is apparently wanting the customer to believe that they’re getting more value from their EW than they actually are getting. Tsk, tsk, tsk…
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WTL: 90 days is for phone service. guess what, you have to call in and pay apple in order for them to determine if your computer is broken in order to obtain free warranty service after the 90 days phone service ends. of course, if you live near an apple retail center, you can bring the computer in for them to trouble shoot. apple also reduced its warranty on its ipod from 1 year to 90 days. i should have written apple rather than mac, because the reduction that i was thinking of when i wrote the comment above was me thinking about the ipod warranty. however, if you have an apple 1yr standard warranty for the computer, and have to pay apple in order for apple to verify that your computer is broken after the 90 day telephone warranty period, that effectively makes the warranty a 90 day warranty. not everyone lives near an apple retail center. there are no “rare exceptions” for accidental warranty coverage, unless the apple store decides that it looked like a manufacture defect rather than an accident.
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Don’t know if anyone has mentioned this, but the Mac warranty also tries to trick you about the length of the warranty renewal.
Its set price for the warranty after the first years says it covers three years. However in fine print you find that it is not three additional years, but rather three years from the purchase date.
That way you are actually only paying for two more years of service.
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I think Apple care is a rare exception to the Warranty scam, but not for good reasons: 1. MacBook Pros are pretty much notorious for going dead a few months after the and of warranty. 2. They are VERY expensive to repair.
I normally don’t got for extended warranties, but I wish I had for my MacBook Pro – I just got a $1,000 repair bill for mine!
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For extended warranties I almost always recommend them for laptops, and almost never recommend them for desktops.
Desktops are relatively easy and cheap to fix, but laptops are rarely easy to fix, especially if it’s the mainboard that dies (as I experienced recently).
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Before this thread fades, let an Apple fanbois clarify some points obscured in the comments above.
* An Apple extended warranty can be purchased at a discount from third-party vendors. LA Computer Company or eBay, for example.
* To get warranty service, you can also take your Apple product to an Apple Store Genius Bar. Nice if you prefer dealing with humans, or are trying to avoid charges after the free 90 days of support on the factory warranty. Requires a convenient Apple Store, though!
* Apple’s warranty service is top-notch–they treat you like a CEO. You make your call, they overnight a box to you, and overnight it back when it is done. No third-party, ship-at-your-own-expense, drive-it-across-the-state-to-a-repair-center foolishness.
Just sayin’ !
Oh, and one more anecdote for the laptop crowd: my boss has had 2 laptops in three years. #1 a Sony, and the screen cracked when he pulled it out if its carry bag as normal, not roughly. The replacement, an HP, no longer properly charges it batteries, even a new one. So, Apple or no, laptops are prima donnas.
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[...] all products involve profit. There is nothing wrong with profit. But extended warranties are thick with profit and offer consumers little to nothing in [...]
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Great advice. Thanks. Love your site. WE have all kinds of people calling to try and warranty things…plumbing, a/c, etc. Instead, we own a home warranty that covers it all…even the garage door opener. We have used it to have a water heater replaced, a/c unclogged or something and dish disposal replaced. The service people are happy to give you new stuff, in our experience.
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http://www.fivecentnickel.com/2009/09/28/create-your-own-extended-warranty-fund/
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The apple care was a life saver. My sons’ mac altho it is a great machine has caught fire due to a faulty cord and had a myriad of issues which were all repaired promptly.
Re appliances. I talked to an long time appliance repair man who told me to buy the cheapest model appliance you can because none of them are built to last anymore. He said not to expect not to expect more than 7-10 years for new applainces. Even Maytag which was a great product at one time has now turned to cheap components (like its competitors) that won’t last. This guy came out to look at my whirlpool dishwasher (original retail cost $999, I got an open box special) that was only 13 months old. Consumer Reports had rated it very high too! He said that model was one of the worst ever made and repairing it was expensive because small parts cannot be replaced. The whole pump had to be replaced. Thank goodness i had the extended warrenty! In fact this dishwasher was a replacement for a previously purchased dishwasher that broke down so many times, Best buy had to replace it (again thank goodness for the extended warrenty).
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Statistically, laptops–regardless of brand–are more likely to have a hardware failure within the first year than a desktop, and are also more expensive to repair (and more difficult to repair yourself, beyond harddrive/RAM swapping). They’re getting better, but they are still not “reliable” compared to many other forms of electronics. Apple, Dell–doesn’t matter. Laptops are more expensive and more prone to hardware problems than desktops.
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Statistically, laptops–regardless of brand–are more likely to have a hardware failure within the first year than a desktop
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Hardware failures within the first year don’t factor in here, since that’s within the warranty period.
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Statistically, the rate of failures for almost any product can be divided in three periods:
1. Early failures (e.g. material and assembly problems)
2. Random failures (no common cause)
3. Wear-out failures. (fatigue or depletion of materials)
Legal warranty normally covers the first period. There are usually few failures in the second period, relative to the first and third period. Extended warranties cover the random failures period.
See http://www.ideas-smart.com/extended-warranty-usually-worthless for more information.
Own “extended warranty fund” should result in saving money in the long run.
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