Dumb money: Extended warranties

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"Neither Circuit City nor Best Buy discloses how much of its bottom line comes from extended warranty sales. But analysts have estimated that at least 50 percent and in some lean years 100 percent of profits at the electronics retailers come from extended warranty sales."

never buy a service plan unless the product is guaranteed to break

Comments

What is even dumber about

What is even dumber about the warranties is...

My iPod broke, likely needing a new battery. I bought a warranty on it, and they were going to take weeks to get me a new iPod, so I said I would buy a new one anyway. So they offered to give me my warranty price back off the new iPod, which didn't seem like a bad deal, but then they wanted to pro-rate that...and thus give me like only $30, so I said screw them...they probably ate a $150 refurbishment fee, and I now have 2 iPods.

The fact that they only want to give you a pro-rated portion of the warranty back for a broken item goes to show how little they value them or respect customers that chose to buy them.

Never Get Extended Warranties

Except on a car, those tend to pay off nicely.

People that buy large ticket items from such horrible companies like Circuit City and Best Buy have issues in the first place. Those sales prices don't look so good when you need service and find out you made a deal with the devil to save a nickle and now it's gonna REALLY cost you messing around with those idiots.

I never buy warranties on electronics or appliances and all the money I've saved allows me to simply replace them when/if they break with something newer, better, cheaper to replace it with.

However, some people are just unlucky and a friend of mine had a fridge, microwave and stove all require repair within a 12 month period which completely paid for his warranties.

Without a warranty I'm certainly not getting most appliances repaired as those repair guys tend to want $100-$200 walking in the door and you can replace a washing machine or dryer easily for about $500 so just get a new one and start fresh instead of throwing good money after bad.

Never get ipods

Quote:
My iPod broke

They all seem too

Sorry - off topic mini-rant...

not even on a car

but i'm a fanatic about self-insuring. i do keep comprehensive insurance on cars with big windshields because my wife seems to love driving into flying gravel.

Disposables

Quote:
so just get a new one and start fresh

I'd encourage you to ponder the environmental impact of such thinking. What happens to the old item?

i try to at least be

i try to at least be cognizant of green issues and batteries and electonics do give cause for concern about recycling.

espresso machines

I'd never get another espresso machine without an extended warranty. It goes back to get serviced about once a year and we get a replacement for that time; they pick it up, bring it back nice and clean. What more could you want? Imagine having to spend a week without espresso in the office....

Real story: Our espresso machine got stolen over the weekend. I think it was the cleaning crew, almost nobody else had access. Not only did it get stolen, but they replaced it with the *exact model*, only non-functional. It was easy for us to tell that it wasn't ours (but no s/n), we just had it repaired on the extended plan :-). (I couldn't make that up if I tried.)

I like spamming

the environemnt

but i feel sorry for the engineers who have to figure out algorithmic ways to remove my pollution

espresso machines fit the

espresso machines fit the "guaranteed to break" requirement

Never get ipods I have a

Quote:
Never get ipods

I have a friend who worked at Circuit City, and she said the only ipods that actually keep working are the minis with the metal body. And, Apple is changing all of their new ipods to have a metal body and use the same specs as the minis.

I've never had an issue with my mini... *knocks wood*

Sadly, though, this may have turned many people off Apple's products for good.

best buy

What's even more insane is that Best Buy employees say that they don't make any commission off selling those policies but they all push them like hell to the point of making you feel stupid if you don't buy them. If that is true, then I would change jobs because there are plenty of other places that do pay commission on selling those.

less signal, more noise.

less signal, more noise.

100% profit

they make 100% profit on every warranty that they sell...if the customer never uses it.

somewhere there is a web

somewhere there is a web page that decodes the big numbers on the wall at Best Buy... one of the most important metrics is # extended warranties sold that day.

scoreboard

this the one, john?

Impact this

I'd encourage you to ponder the environmental impact of such thinking. What happens to the old item?

It's all raw materials that originally came from the environment so when it's no longer useful I return it to it's natural state - aka not in my house ;)

Enviroment my ass "the lead, the mercury, the radioactivity...", um, these aren't things you just whip up in an Alchemists lab, they occur naturally, just maybe where we deposit them vs. where we found them are two different issues.

Let's hijack the thread, what the hell...

FWIW, they can track Lewis & Clark campsites due to the high levels of mercury found in the latrines because the entire team was taking large doses of mercury for their syphillis.

I thought this was common knowledge

Best Buy makes almost all of its profits from warranties and accessories. Warranties are almost all profit and the markup on accessories is VERY high (compared to cost).

Everything else has very low margins. The camera that you buy - they make 5% on the camera (which is more like a loss considering their overhead), 85% on the extended warranty, 70% on the carrying case, 60% on the battery. The numbers are guesses, but I bet I'm not too far off.

A long time ago I was in that industry

Extended warranties were and are a cash cow. Commissioned sales people were paid 25% of the selling price right off the top, the company trained salespeople non stop to sell warranties, monitored their succcess, and retrained or got rid of those that didn't meet the benchmarks.

A few years after that I was involved in the Auto industry, I made 50% of the selling price of all 3rd party warranties and insurance...not to mention mop & glo (scotchguard etc..) and rustproofing and on and on... I regularly made more money on a sale than the sales people by selling the right mix of after market products and financing.

Most profit on big ticket items comes not from the item but from the add ons and service.

Argos (a big UK retailer)

Argos (a big UK retailer) offer warranties on everything now and it just don't make sense. I bought a calculator for £2.99 (I was feeling flush at the time) and they offered a 3 year extended warranty for an extra £2.49

and of course, having so much value I'm bound to file the warranty document away safley and remember where I put if 2 1/2 years done the line my calculater broke.

things break quick or they last for ages

if somethings going to go wront it'll almost certainly do it within 28 days or on day 366, otherwise it'll run for years. Extending a warrenty is poiintless, especially if you read the smallprint and discover what falls under 'wear and tear' anyway.

But if you insist on not fixing older things then at least freecycle them. A lot of people out there would be perfectly happy to take a four year old washing machine off your hands and repair it (me amongst them - my last one was 16 when it spun its last - moment of respectful silence for my ancient white goods please).

easy sell

>>>>paid 25% of the selling price right off the top

Back in my old life it was a staple. We used to call selling an extended warranty, "extending the bend."

My only exception

has been the service plans for my laptops, but with prices so low now, even that makes less sense.

Dont know if they still do it, but Circuit City used to print on the skews a number that tells the salesperson what they make on the extended warranty. Usually the advertised loss leaders had the smallest spiff, so the sales team had an easy incentive to upsell and the skews made it easy for them to pick products to push.

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