Latest / Stuff You Should Know / Extended Product Warranties: To Buy or Not to Buy?

Transcript

Extended Product Warranties: To Buy or Not to Buy? · Stuff You Should Know

• 0:00
  Speaker 1: Brought to you by the reinvented two thousand twelve camera.
• 0:03
  Speaker 1: It's ready. Are you welcome to Stuff you Should Know
• 0:08
  Speaker 1: from house Stuff Works dot Com? Hey, welcome to the podcast.
• 0:13
  Speaker 1: How are you, Chuck? I'm good? This is take two.
• 0:15
  Speaker 1: If we rarely do two takes, but Josh messed up
• 0:17
  Speaker 1: so bad, we should should we tell them what I said? Okay,
• 0:22
  Speaker 1: because then we have to do take three? All right? Well, anyway,
• 0:24
  Speaker 1: this is stuff you should know. And as Chuck just said,
• 0:27
  Speaker 1: it's Josh here and Chuck there, and um we had
• 0:32
  Speaker 1: we were talking earlier about how it's getting to be
• 0:34
  Speaker 1: that time of year again, right, the tis the season
• 0:37
  Speaker 1: time to go. Cut down a perfectly healthy tree, prop
• 0:40
  Speaker 1: it up like some sort of corpse in the corner,
• 0:43
  Speaker 1: Hang things on it, yeah, exactly, decorate it? Yeah, decorate it. Um,
• 0:48
  Speaker 1: shuffle into the malls and turn out our pockets, right,
• 0:51
  Speaker 1: buy things for your family and friends. Have the endless
• 0:54
  Speaker 1: debate over whether or not Walmart Greater should say Happy
• 0:57
  Speaker 1: Holidays or Merry Christmas? Right, um, and just basically, you know,
• 1:01
  Speaker 1: celebrate another year past of surviving. Right. Um, that's what
• 1:06
  Speaker 1: we do in my house as Christmas is all about
• 1:08
  Speaker 1: the survival of it another year, opening soup cans with
• 1:11
  Speaker 1: pen knives and you know, good stuff. Yeah, so yeah,
• 1:15
  Speaker 1: I guess with Chuck and I are saying, it's the
• 1:17
  Speaker 1: holiday season, it's upon us, and um, clearly, the one
• 1:21
  Speaker 1: question that always comes to mind for me is should
• 1:26
  Speaker 1: I or should I not buy an extended product warranty?
• 1:30
  Speaker 1: And I know a lot of times our podcasts are
• 1:32
  Speaker 1: really interesting, um tidbits that you can share. Well, no,
• 1:36
  Speaker 1: this isn't interesting in that way, but I think a
• 1:38
  Speaker 1: lot of people don't know whether or not to purchase
• 1:42
  Speaker 1: them because they're faced all of a sudden at the
• 1:44
  Speaker 1: register and they're kind of in a panic. So yeah,
• 1:47
  Speaker 1: they're trying to help you exactly. This is This is
• 1:49
  Speaker 1: precisely why we're we're broadcasting this podcast. It is um,
• 1:53
  Speaker 1: it's it's I never knew, and um, what I found
• 1:56
  Speaker 1: out I was happy to know, actually sure, because yeah,
• 1:58
  Speaker 1: it's become like this real high pressure sales pitch and
• 2:01
  Speaker 1: it comes like when you're almost out the door and
• 2:03
  Speaker 1: all of a sudden like, oh, well, of course you
• 2:05
  Speaker 1: want the extended warranty, right, you're right, I don't know,
• 2:07
  Speaker 1: do I write It's like, do you want the apple
• 2:10
  Speaker 1: pie McDonald's. Yes, all of a sudden, you're thinking, I
• 2:13
  Speaker 1: don't want an apple pie, but I want an apple pie.
• 2:16
  Speaker 1: But I want apple pie. And I gotta say, you know,
• 2:18
  Speaker 1: especially back when it was fried, I always wanted an
• 2:21
  Speaker 1: apple pie. Now they're baked, they're still pretty good. But dude,
• 2:25
  Speaker 1: compared to the fried ones, like, yes, you can still
• 2:29
  Speaker 1: get the fried apple pies a Checkers by the way,
• 2:31
  Speaker 1: looking to get a warranty on the apple pie is
• 2:33
  Speaker 1: what I want to know. You could maybe, if you,
• 2:37
  Speaker 1: if you, if you should probably not um and and
• 2:40
  Speaker 1: that's actually one of the reasons. There's several. There's several.
• 2:43
  Speaker 1: There's no definitive answer whether should you should or shouldn't
• 2:47
  Speaker 1: get an extended warranty on a product. Sorry to break
• 2:50
  Speaker 1: it to you, we can't just say no. Um And
• 2:54
  Speaker 1: we'll get into some some reasons or some situations where
• 2:58
  Speaker 1: it is a good idea to maybe opt for or
• 3:00
  Speaker 1: not a good idea. Right, we'll do both. But if
• 3:03
  Speaker 1: you look at it from the law of averages um
• 3:08
  Speaker 1: across the board, it's a bad idea to buy an
• 3:10
  Speaker 1: extended warranty. Just statistically speaking, either the product you have
• 3:16
  Speaker 1: is going to break within the first year, which is
• 3:19
  Speaker 1: covered by the manufacturer's warranty that all items come with. Yeah, um,
• 3:25
  Speaker 1: or it's gonna break after you know, the the extended
• 3:28
  Speaker 1: warranty has lapsed. So either way, it was speaking just
• 3:33
  Speaker 1: on averages, you're going to have just wasted you know,
• 3:35
  Speaker 1: X amount of dollars for something you've never used. And
• 3:38
  Speaker 1: it's really just an insurance policy, which again is a
• 3:41
  Speaker 1: form of gambling. Right, um and uh. For the most part,
• 3:48
  Speaker 1: an extended warranty is a losing bet. But there are
• 3:52
  Speaker 1: some instances where you might want to stop and say,
• 3:55
  Speaker 1: you know what, sales jerk, I am going to buy
• 3:57
  Speaker 1: that extended warranty. Right, you want to give a well,
• 4:00
  Speaker 1: I mean, first just want to throw out, you know,
• 4:02
  Speaker 1: I'm statman, a quick stat. Americans, uh, spend sixteen billion
• 4:07
  Speaker 1: dollars a year on warranties, extended warranties. Yeah, that's a
• 4:10
  Speaker 1: lot of dough. I've got another stat for you that's
• 4:13
  Speaker 1: gonna pop your eyes out. Okay, eight percent of that profit. Yeah,
• 4:18
  Speaker 1: only of that sixteen billion spent on warranties is ever
• 4:23
  Speaker 1: shelled out and repairs their replacements, should we Just in
• 4:27
  Speaker 1: the podcast, there's exactly that sounds like your answer, there's
• 4:31
  Speaker 1: a yeah, yeah, that's pretty much the speaking by the numbers.
• 4:35
  Speaker 1: You're a sucker if you buy an extended warranty, but
• 4:38
  Speaker 1: there's some instances where you're you're not a sucker. Um.
• 4:41
  Speaker 1: And actually another stat for you there, Chuck. Did you
• 4:44
  Speaker 1: know that Circuit City uh one percent of its operating
• 4:49
  Speaker 1: income in two four, as far as securities analysts were concerned,
• 4:53
  Speaker 1: came exclusively from the sale of extended warrant And I
• 4:57
  Speaker 1: think something like, you know, they're going out of business,
• 4:59
  Speaker 1: stud maybe that I should tell you something. Well, the
• 5:01
  Speaker 1: problem is if you're not selling electronics, you're not going
• 5:04
  Speaker 1: to sell an extended warranty. If you're dependent that dependent
• 5:07
  Speaker 1: on extended warranties, and yeah, you're gonna go under when
• 5:09
  Speaker 1: the electronic sales plummet. Now when do they push it
• 5:11
  Speaker 1: so hard at the registry? You know, Oh yeah, it's
• 5:13
  Speaker 1: a big time UM and Best Buy actually they I
• 5:18
  Speaker 1: think in that same year fifty of their operating income
• 5:22
  Speaker 1: came from extended warranties. Yeah, you know, I'm not allowed
• 5:25
  Speaker 1: to go within a hundred feet of the Best Buy,
• 5:27
  Speaker 1: so they have everything you need. I wouldn't know. My
• 5:30
  Speaker 1: wife won't allow it. She's she has a complete boycott
• 5:33
  Speaker 1: because you don't know what you're missing. Chuck, they have everything,
• 5:36
  Speaker 1: it's great, But actually best Buy also has extended warranties
• 5:41
  Speaker 1: on absolutely everything. Uh. There is a guy who know
• 5:45
  Speaker 1: a gall I'm sorry, who was writing for Business Week.
• 5:48
  Speaker 1: UM wrote an article on extended warranties that came across
• 5:51
  Speaker 1: and she she said that best Buy sells at four
• 5:56
  Speaker 1: year extended warranty on a Magnifox DVD player that they
• 6:00
  Speaker 1: sell for thirty. That doesn't make sense. I don't know
• 6:07
  Speaker 1: what Adam Smith would say about it, but famous economist,
• 6:11
  Speaker 1: Oh I know, okay, he's he's one of my hairs,
• 6:13
  Speaker 1: as you're well aware. Right, so we got a little bit. Yeah,
• 6:16
  Speaker 1: we could sit here all day and punch holes in
• 6:18
  Speaker 1: extended warranties and call you a goon if you've ever
• 6:20
  Speaker 1: purchased one. Um, it's to eat his own though. That's
• 6:23
  Speaker 1: kind of our unofficial motto here at stuff you should know. UM,
• 6:27
  Speaker 1: so let's tell them from sometimes when they should right.
• 6:30
  Speaker 1: One reason I've got for you, Josh, is if it's
• 6:33
  Speaker 1: a high dollar item, if you're gonna spend several thousand
• 6:36
  Speaker 1: dollars on on an item like let's say, you know,
• 6:39
  Speaker 1: a big flat screen or something like that. Uh, it
• 6:42
  Speaker 1: may be worth a couple of hundred bucks to to
• 6:44
  Speaker 1: cover it a little longer. Yeah, because I mean you've
• 6:47
  Speaker 1: already showed out several thousand what's the what's the harm?
• 6:50
  Speaker 1: And um this this actually comes into play most often
• 6:54
  Speaker 1: with rear projection TVs, which you can run into several
• 6:57
  Speaker 1: thousands of dollars um. And apparently the typical rear projected
• 7:02
  Speaker 1: projections TV, the bulb used in the projector um is
• 7:07
  Speaker 1: rated for about five thousand hours of use, and if
• 7:11
  Speaker 1: you buy an extended warranty, if you're an average American,
• 7:14
  Speaker 1: you're gonna watch more than five thousand hours of on
• 7:16
  Speaker 1: that TV within that three year period. It is, but yeah,
• 7:22
  Speaker 1: I think it's just you know, speaking on averages and
• 7:24
  Speaker 1: statistically you're gonna watch that much in three years, so
• 7:28
  Speaker 1: if when that bulb finally goes out, you'll be covered.
• 7:31
  Speaker 1: So that's that is a specific instance where it's a
• 7:33
  Speaker 1: pretty good idea to go ahead and chill out an
• 7:35
  Speaker 1: extra four dollars. I know, if you have a PC
• 7:39
  Speaker 1: laptop or home PC might also be a good opportunity
• 7:42
  Speaker 1: to buy one because I think there's a thirty seven
• 7:44
  Speaker 1: percent chance that it's gonna need repair within that three
• 7:48
  Speaker 1: year period. Yeah, and actually PC's rank at the top
• 7:52
  Speaker 1: for the for um needing the percentage that they'll need
• 7:55
  Speaker 1: to repair in three year And it's not cheap to
• 7:58
  Speaker 1: get it fixed either. That's something else you have a consider. No,
• 8:00
  Speaker 1: and um, those things usually come with tech support, which
• 8:04
  Speaker 1: I think Apple, uh their tech support after uh, you
• 8:08
  Speaker 1: know they're manufacturers, one year warranty goes away. Those each
• 8:12
  Speaker 1: call goes up to like forty or forty nine dollars
• 8:15
  Speaker 1: and that's pretty much industry why they're expensive phone calls.
• 8:18
  Speaker 1: So yeah, well they're coming straight to India. So imagine
• 8:22
  Speaker 1: exactly did you know that there's a McDonald's in Massachusetts
• 8:28
  Speaker 1: where the drive through you're actually speaking to a call
• 8:31
  Speaker 1: center in Colorado. You're kidding, no, kid, you not. They
• 8:34
  Speaker 1: outsourced the order taking and then the people type it
• 8:38
  Speaker 1: in on a computer screen and then back at the
• 8:40
  Speaker 1: at the Massachusetts McDonald's, UM, your orders filled. That's what
• 8:45
  Speaker 1: they call tangential, right. Yeah, So okay, let's let's get
• 8:49
  Speaker 1: back to uh times when you should get an extended
• 8:52
  Speaker 1: warranty cell phones you know you mentioned was a good
• 8:55
  Speaker 1: one because they're easily breakable or lost. Yeah, if if
• 8:59
  Speaker 1: you are absent minded, if you lose stuff a lot,
• 9:02
  Speaker 1: you probably want to spring for some sort of extended warranties,
• 9:05
  Speaker 1: specifically with the cell phone. Right. Um, A lot of
• 9:08
  Speaker 1: extended warranties won't cover uh loss, theft or you know,
• 9:12
  Speaker 1: accidental damage. They'll usually cover you know, some sort of
• 9:16
  Speaker 1: manufactured defector, uh if the thing died in natural death
• 9:20
  Speaker 1: within this time. Um, But the cell phone warranties are
• 9:23
  Speaker 1: designed specifically for people who lose their phones. So you're
• 9:27
  Speaker 1: gonna pay like five bucks a month extra, and then
• 9:30
  Speaker 1: you're gonna be slept with the deductible when you know,
• 9:32
  Speaker 1: call it in. But say it's a four BlackBerry and
• 9:38
  Speaker 1: you're you're deductibles a D five, you're still gonna pay
• 9:41
  Speaker 1: less than you would forgetting that BlackBerry. Right, So it's
• 9:45
  Speaker 1: kind of up to you to do the math and
• 9:47
  Speaker 1: to look at yourself in the mirror and determine if
• 9:48
  Speaker 1: you're one of those people exactly forget some loses and breaks,
• 9:51
  Speaker 1: and that's our advice to you. Um, don't go into
• 9:55
  Speaker 1: a store to buy a cell phone or rear projection
• 9:57
  Speaker 1: TV or anything else. Um without doing some homework first
• 10:01
  Speaker 1: find out if it will break within within that time. Yeah, yeah, exactly.
• 10:07
  Speaker 1: That's very helpful site. Um, and it's actually worth the
• 10:10
  Speaker 1: subscription to. There's some really great information on there you
• 10:13
  Speaker 1: can't get unless you're a subscriber, right, Um, So no
• 10:17
  Speaker 1: the product, know yourself, and then when the sales guy says, oh, yes,
• 10:22
  Speaker 1: of course you want the extended warranty, you'll you'll know
• 10:25
  Speaker 1: on the spot yes or no. It's good yourself exactly,
• 10:29
  Speaker 1: and you won't have to second guess yourself if you do. Um.
• 10:34
  Speaker 1: If you do second guess yourself and you didn't get
• 10:36
  Speaker 1: an extended warranty, but you decide that you want one. Uh.
• 10:39
  Speaker 1: Most states, actually state law says that you've got thirty
• 10:43
  Speaker 1: days to purchase an extended warranty for that price, and
• 10:47
  Speaker 1: I believe most states also give you thirty days to
• 10:49
  Speaker 1: cancel it after you get it. You should probably check
• 10:52
  Speaker 1: um with your state. I have no idea what state
• 10:55
  Speaker 1: department would would concern themselves with that, but I'm pretty
• 10:59
  Speaker 1: sure if you type and extended warranties into your secretary
• 11:02
  Speaker 1: of state, there you go they I'll bet you that
• 11:04
  Speaker 1: if you type that into your Secretary of State search bar,
• 11:07
  Speaker 1: you're probably gonna come up with something, right, right, I would.
• 11:09
  Speaker 1: I would say, so, okay, So now now you know
• 11:12
  Speaker 1: some instances when it's a good idea, When is it
• 11:14
  Speaker 1: not a good idea? Well, no, I would say it's
• 11:17
  Speaker 1: a bad idea. Um. First of all, you should look
• 11:20
  Speaker 1: at your credit card. Most credit cards, American Express a
• 11:23
  Speaker 1: master card will automatically ensure your item for an extended
• 11:27
  Speaker 1: period of time upon purchase. The high end Visa master Cards,
• 11:31
  Speaker 1: the more expensive one, well ensure it. But I think
• 11:33
  Speaker 1: all m X cards ensure. Yeah, add an extended warranty on, right,
• 11:37
  Speaker 1: So you may be paying for something, uh that's that's
• 11:40
  Speaker 1: already covered. And another thing that we failed to mention
• 11:43
  Speaker 1: earlier is because you're automatically covered for a year from
• 11:47
  Speaker 1: the manufacturer, you're paying for three years. It's not three
• 11:50
  Speaker 1: years at the end of that one year. It's three
• 11:52
  Speaker 1: years from the point of purchase. So you're actually paying
• 11:54
  Speaker 1: for a year that's already covered anyway by the manufacturer's warranty. Right,
• 11:59
  Speaker 1: So it's a three year the scam there, it is
• 12:01
  Speaker 1: a three year extended warranty is actually just a two
• 12:04
  Speaker 1: year extension exactly on top of the warranty that you're
• 12:07
  Speaker 1: getting right. Uh, you also have to pay for shipping
• 12:09
  Speaker 1: that most times both ways. So if you're gonna ship
• 12:13
  Speaker 1: your cell phone to Verizon and then back, you might
• 12:17
  Speaker 1: be spending more money and waiting on your phone. Uh,
• 12:20
  Speaker 1: it might be worth it just to go in and
• 12:21
  Speaker 1: get another phone and recycle the phone. Yeah, if you are,
• 12:25
  Speaker 1: you know so. So basically, I guess if we were
• 12:28
  Speaker 1: to sum this up, we would say, if you are
• 12:32
  Speaker 1: caught on the spot and asked whether you want an
• 12:35
  Speaker 1: extended warranty, uh, and you can't make up your mind,
• 12:37
  Speaker 1: go with no. If you decide that you do want one,
• 12:40
  Speaker 1: actually purchase from the manufacturer. You don't want to purchase
• 12:44
  Speaker 1: an extended warranty UM from a retailer sorry big box
• 12:47
  Speaker 1: electronic stores. UM, because they basically take out insurance policies
• 12:53
  Speaker 1: on each warranty and pocket a substantial amount of the
• 12:56
  Speaker 1: money you've just given them. Um. The manufacturer's warranty should
• 12:59
  Speaker 1: be a lot cheaper, and you're there's no middleman for
• 13:02
  Speaker 1: you to ship too. You can just deal directly with
• 13:04
  Speaker 1: the manufacturers. Plus you have thirty days to consider it,
• 13:07
  Speaker 1: so don't jump on the spot. You know this Christmas season,
• 13:11
  Speaker 1: remember the reason for this season, knowing whether or not
• 13:14
  Speaker 1: you should purchase an extended warranty. Right, I had a
• 13:16
  Speaker 1: real bad experience with one recently, so let's hear it. Well,
• 13:19
  Speaker 1: I'll just I'll just do it quickly here. Uh. You
• 13:22
  Speaker 1: typically never buy them, because I think it's a little
• 13:24
  Speaker 1: bit of a sucker's bet. But I bought a kind
• 13:26
  Speaker 1: of a high end washer and dryer from a store.
• 13:29
  Speaker 1: Can I mention our producer, Jerry is saying, shaking her head, no,
• 13:33
  Speaker 1: so we will not. We will not mention the big
• 13:35
  Speaker 1: box appliant store that I bought it from. But we
• 13:38
  Speaker 1: bought the warranty. Uh. The washer broke and it took
• 13:41
  Speaker 1: seven visits, seven separate visits that I had to take
• 13:44
  Speaker 1: off time, seven times from work. Wrong parts were ordered. Basically,
• 13:48
  Speaker 1: the problem was the company that they had contracted to
• 13:51
  Speaker 1: fix it and was awful, and this big box appliance store.
• 13:55
  Speaker 1: Their argument was take it up with them. My argument
• 13:59
  Speaker 1: right back to them is since you don't give me
• 14:01
  Speaker 1: a choice of who to use, then they are you
• 14:04
  Speaker 1: essentially right. And they didn't see it that way and
• 14:07
  Speaker 1: they it's basically just quit returning my calls. I fixed
• 14:10
  Speaker 1: it myself and they quit returning my calls. So yeah,
• 14:14
  Speaker 1: so what did you do? Burn the store down? Anything? No,
• 14:17
  Speaker 1: I'm gonna go in and try and get my money
• 14:18
  Speaker 1: back on the warranty at some point, but I will
• 14:20
  Speaker 1: never shop there again. And I've tried to spread the
• 14:22
  Speaker 1: word even though I can't do it. And there you go. Listeners,
• 14:25
  Speaker 1: now you know what store to avoid, apparently, big box
• 14:28
  Speaker 1: electronics store. If you see one with that sign hanging
• 14:31
  Speaker 1: out front, stay away, but stick around because it's time
• 14:35
  Speaker 1: for listener mail, right, Chuck, that's right? Okay, So Chuck,
• 14:41
  Speaker 1: I get to read this one. This one's from a
• 14:44
  Speaker 1: guy named Alexander. This is complimentary, which makes me feel good.
• 14:47
  Speaker 1: It is very complimentary. Was only the highest compliment that's
• 14:50
  Speaker 1: ever been paid to this via email via electronic mail, right, uh,
• 14:54
  Speaker 1: Alex writes, soce from Edelborough, Massachusetts, and it's on the
• 14:59
  Speaker 1: how Prayer You in Works podcasts. Uh. Alex says that
• 15:03
  Speaker 1: he likes our podcast. He appreciated it knowing your love
• 15:07
  Speaker 1: for all things scientific. I thought for sure it was
• 15:10
  Speaker 1: going to be and it was going to be open
• 15:12
  Speaker 1: season on any religious topic, especially prayer healing. But the
• 15:16
  Speaker 1: fair and even discussion of the subject really speaks to
• 15:19
  Speaker 1: your dedication to truth and discovery. I appreciate your discipline
• 15:23
  Speaker 1: and applying the same high standards of research to this
• 15:25
  Speaker 1: topic despite any of your personal opinions. That's real integrity,
• 15:30
  Speaker 1: and now have an even greater respect for your work.
• 15:33
  Speaker 1: That's high praise Chuck. And actually he he says that
• 15:37
  Speaker 1: he's a Christian scientist, and he gives the extra kudos
• 15:40
  Speaker 1: to you for knowing their preferred method of treatment and
• 15:43
  Speaker 1: how the results would be different than prayer plus medical procedure.
• 15:47
  Speaker 1: So way to go, Chuck, Way to go to both
• 15:49
  Speaker 1: of us. Yeah it made me feel good. Yeah, you
• 15:52
  Speaker 1: should feel good, Chuck. We try and be fair and balance.
• 15:54
  Speaker 1: Forget Fox News. This is where it's fair and balance exactly. Yeah.
• 15:57
  Speaker 1: So if you want to let Chuck no, you know,
• 16:00
  Speaker 1: give him extra kudos. Let us know we're fair and balanced.
• 16:03
  Speaker 1: Tell us that you hate us because we are against
• 16:06
  Speaker 1: big box consumer electronics stores. Send us an email to
• 16:10
  Speaker 1: Stuff podcast at how stuff Works dot c o M
• 16:19
  Speaker 1: for more on this and thousands of other topics. Is
• 16:22
  Speaker 1: it how stuff works dot com? H brought to you
• 16:26
  Speaker 1: by the reinvented two thousand twelve camera. It's ready, are
• 16:30
  Speaker 1: you