A couple of months ago I purchased a new Dell laptop. We’ve needed a new home computer for a while now and the deal I ran across was too good to pass up. So I purchased it for $400 via the Dell website. As an aside, Dell has always been good to us. Their products have performed well and suited our needs for internet, email, blogging, etc. just fine. I’ve also used a Dell for a work computer in the past and was absolutely pleased with the performance and reliability.
A few weeks after receiving my laptop I was contacted by Dell and asked if I wanted to purchase an extended warranty. After kindly and patiently listening to the offer, I gave them my pre-programmed response of “no thank you, no thank you and no thank you.” In fact, I’m used to hearing this question after past purchases of video cameras, digital cameras, TV’s, etc., so in saying no so many times it’s now my default answer as I have my ears half open.
[To provide a little more background, the Dell warranty I was being offered extended my manufacturers warranty by a few more years, if I remember correctly. The cost was about 25% of my purchase price. It covered non-manufacturer problems such as personal accidents. However, since I wasn’t considering the warranty from the beginning of the conversation, I didn’t catch all the details.]
I know this is where electronic stores, in particular, make a lot of money. For example, if you never use your coverage you’ve wasted the cost of the extended warranty. However, if you do use the coverage, the price you pay may be cheaper than the replacement cost of the product, or repair costs the manufacturer, or a local repair shop will charge you.
Should I have bought the warranty? The unthinkable occurs.
Well, a couple of months after having my laptop the unthinkable occurred. I accidentally knocked over a cup of coffee directly onto the keyboard. While at first I didn’t think the laptop was damaged (I quickly turned it upside down to drain out the coffee), it got progressively worse over a few days as the touch pad stopped working, the keyboard malfunctioned and finally, it wouldn’t boot up anymore.
I suppose my incident might be on the rare side. I would imagine the majority of people don’t have an accident such as this in the first few months of using their new laptop. When I contacted Dell to discover my options, I was told my 1 year warranty didn’t cover the damage because the computer problems were the result of a personal accident (which is understandable).
I was then transferred to another department who handles such cases as mine (the folks who didn’t by the extended warranty). I was told Dell would repair my laptop completely for approximately $250 (remember I paid $400 for it). Of course, they mentioned the extended warranty would have covered the incident and that I should definitely purchase it next time. :)
What did I do?
I figured I had the following choices:
- Try to repair the computer myself
- Find a local repair shop
- Pay Dell the $250 to fix it and ship it back to me within 8-10 business days
- Buy a new computer
- Do nothing
Given I had the emergency savings to cover the cost of the repair, I decided to let Dell fix it. I shipped it off just recently and waiting to get it back (supposedly 8-10 days). I decided in the end I didn’t want to buy a new computer which would have cost me more money. I also didn’t have the know-how to fix it myself, nor the time to investigate how. I felt taking it to a local repair shop was a bit risky as the computer manufacturer was probably best suited to work the issue.
Will I buy an extended warranty next time?
I suppose this incident has gotten me thinking about purchasing extended warranties and if it’s really the right approach. According to Consumer Reports, extended warranties aren’t worth it. In a previous post about extended warranties here at Bible Money Matters, Pete does a good job of covering the reasons why:
- Extended warranties usually cost more than they’re worth: Before you buy an extended warranty sit down and consider the replacement cost of the item you’re purchasing. Often it doesn’t make any monetary sense. Instead of buying an extended warranty, self insure yourself against product failure by saving a little bit of money each month to replace your product in case it dies.
- The warranty may not cover what you think it does: Often the warranty has exclusions that mean things you think you’re covering, aren’t actually covered. Some parts will be covered, others won’t. Or sometimes repairs will only be done so many times, or until the value of the item is exceeded. Check the fine print of any warranty you purchase.
- Warranties are a big store profit center: According to consumeraffairs.com industry sources put the profit margin on consumer electronics extended warranties at between 40 percent and 80 percent. That just goes to show that more often than not people are not using their warranties.
- Duplicate Coverage: Sometimes the things you’re buying the warranty for are already covered under the product’s manufacturer’s warranty. Double check to make sure.
- Product breakdown trends: Trends have shown that if a product is going to have a problem, it will usually have that problem within the first year, or in the last years of service. During the first year most products are covered by the manufacturer’s warranty anyway. During the last years of service usually even the extended warranty has expired, and you’re probably going to want a newer item anyway.
The above reasons make a lot of sense to me and support well why I’ve been against purchasing extended warranties in the past. In fact, I’ve always felt like saving the money in an emergency fund was a better approach versus paying for an extended warranty you may never use.
But to be honest, I wish I would have purchased the extended warranty in this case. Remember, the extended warranty would have cost me around $100 versus the $250 I just paid Dell.
Funny thing, J.D. Roth over at Get Rich Slowly recently posted about how he survived the computer catastrophe of 2010. He said he goes through laptops every few years and plans to purchase extended warranties going forward (against his previous opinion of them).
Items such as laptops can be quite valuable when it comes to using for a business, or even for personal use when using them as you manage your finances and for staying connected with people.
So, what do you think? Was my situation one of those rare occurrences where the warranty may have been a good deal for me, or not? Should I stick to my guns and continue to avoid purchasing extended warranties for all products? Or, for such precious items as a laptop, does an extended warranty make sense?
I’m firmly in the “no” category. I bought an extended warranty for my camera. I never used it. I bought an extended warranty for my tv. I never used it. I bought one for my old computer. Never used it. For all 5 lines on my phone? Never used it.
On any given piece of equipment we are scared to break them or that something will happen. But for the cost of insuring all of them, we could cover the cost of a new one. Those 4 electronics cost a lot to insure and had I stuck with the standard warranty (which covers most things), I would have saved a lot more than the cost to replace one of them.
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I have always wondered about the extended warranty market. I will admit we have used it on a van we once owned and it worked out perfectly. The cost was extremely high, but we got our money out of it. With other products I am not quite sure we did.
What I do now is simple for me, but a pain for others. I purchase big items on my American Express Card. With my particular card, I get an extra year warranty (1 year in addition to the manufacters) since I used my card. I have had decent success with that method when somethign does break. My warranty also covers accidents like coffee stained computers for the first 90 days.
While credit cards are not for everyone, I have found that it works well for me.
Just my thoughts.
Definitely in the “no” category. You would buy an extended warranty under the same circumstances where you would buy insurance, where the loss of the unit would be so catastrophic you would not be able to recover or purchase a new unit, not because it would be painful to do so. (i.e. home insurance, life insurance) A laptop isn’t precious, it’s a tool. If you can’t afford to replace one, you can’t afford to buy one in the first place.
Buying a warranty – or not – on the basis of whether you ended up needing it one time is a terrible way to decide. They’re huge profit centers for a reason, they’re seldom used.
Stick to your guns! :)
I come down in the “don’t buy an extended warranty” camp too. When you break it down you’re almost always better off self insuring against the risk of failure or accident. Quite often a warranty won’t cover an accident of the nature you describe. If this Dell one would have that’s probably the exception to the rule.
Another thing to check is whether or not your credit card you purchased an item with extends the manufacturer warranty – with many credit cards you will get extended coverage at no extra cost!
As I mentioned in my looong comment, Dell with CompleteCare is designed specifically for this. However, on a $400 laptop, the cost of it would probably not be worthwhile. On my laptops, totally worth it..
nc´s last post ..Fun with cameras and Photoshop..
As you mention, on a cheaper laptop like that it’s probably not worth it. If you’ve got a $1000+ laptop/TV/other electronic item and the warranty is reasonable – it might not hurt. However, in most cases you’re not going to have issues if you’re reasonably careful with your items, and treat them well as i do. My last item I bought a warranty on? My old desktop computer. That was a mistake – it lasted 7 years, and is still running – even though I have now upgraded. No warranty needed. As you mention elsewhere the only time you might want to consider a warranty is when you are harder on your items than the average consumer and are reasonably sure that you’ll be using the warranty. Most people? Not needed.
Agreed.. like I said if it doesn’t move it’s not worth a warranty – I don’t understand the warranties for TVs, home electronics, etc at all – especially since that stuff should all be covered against damage (versus just dying) by your homeowners policy.. and with zero deductible if you add it to a relatively inexpensive rider.
For the way most people use laptops, they are just like a desktop — they don’t move.. ;)
nc´s last post ..Fun with cameras and Photoshop..
The ONLY time I would consider buying an extended warranty is for laptop and possibly a flat screen TV.
I am going thu the exact same situation with myl aptop.
I am opting for fixing it myself.
Either that or buy a new one.
Anything else, I would never get the warranty
I should also mention not to discount the local repair shops – never *ever* bring it to Best Buy / Geeksquad (unless you like paying WAY too much), but if you’re talking a Dell/HP/IBM/etc laptop (basically anything but Apple and Sony), the small, independent repair shops can generally do just as good of a job as the laptop’s maker, and at a reasonable cost (they are willing to buy used parts to fix it, etc.)
If you’ve got the knowhow and can buy a laptop off eBay that has a dead screen and swap parts yourself, even better! :)
nc´s last post ..Fun with cameras and Photoshop..
You need to understand exactly what the extended warranty covers, weigh the price versus the benefit, and go from there.
A few notes about this specific case:
1) When you’re talking Dell, you want to extend the manufacturer’s warranty, and also consider adding CompleteCare (or whatever their name for it is today.) Their primary warranty covers defects in the product (ie, it would not have covered this issue); CompleteCare covers everything else (wear and tear, dropping it, accidental damage — anything but intentional damage.)
2) If you have a desktop, in my opinion, it’s probably not worth it. Desktops hardly ever move, and the actual computer is usually safely tucked away. If you spilled your coffee on your keyboard on a desktop, there’s a much better chance that it would not have been a problem to start with (run it under water, or do what friends have done and run it through the dishwasher, and you may be ok), but if it was, you could have gone wherever and replaced the keyboard for $20 or so.
3) Even on a laptop, it’s never worth purchasing the warranty from anyone but the manufacturer — this comes down to the “profit center” point.. the “Big Box” stores have a very slim margin on the hardware, and they want to kill you with the warranty. Their warranties are also the ones that most of the caveats above will apply to – they have lots of exceptions, etc.
In my case, on my laptops, it is a no brainer. I’m a full-time geek and buy much more powerful laptops than the average consumer; my laptops generally cost at least $2000, and I generally get a new one every 2 to 3 years. I am also much harder on my laptop than the average consumer – it is probably used 10-12 hours a day, with at least 20-30 open/close cycles per day, and is usually in the trunk of my car no matter where I go. I have yet to have a laptop where I haven’t needed to use CompleteCare on it to swap some components out due to excess wear and tear – not any serious damage or intentional damage, I just wear laptops out faster than the average user. I generally go with either 3- or 4- year warranty with CompleteCare; I go a bit longer than I plan on keeping the machine as it greatly increases the resale value when I am able to tell buyers that it includes a “bumper to bumper” warranty from the manufacturer — if anything breaks, they are covered.
I did post awhile ago about an experience I had with CompleteCare due to damage instead of wear and tear – I was surprised to find that they required return-to-depot service to repair a hot chocolate spill, instead of rendering it onsite.. but that was my own problem; if I had read the full terms when purchasing it I would have know that. ;)
In your case, would the $100 warranty have covered the spill (IE – are you talking CompleteCare there, or is it just extending the base warranty?) Even if it would have, on a $400 laptop, I’m not sure that you’d generally come out ahead.
On anything other than laptops, my policy is usually if it doesn’t move, I’m not going to put an extended warranty on it. For things like TVs, the warranties will never be worth it in my opinion. For cars, I have actually purchased extended warranties on my previous used vehicles, and always have come out ahead.. I didn’t bother on the new cars, as one was leased and would go back before the warranty was up and the other has a 100k powertrain warranty on it. We just bought a used car, and in a year or so I will need to debate the pros and cons of a warranty for it (as the standard Ford warranty will be almost up).. but I did do some research on it, and it’d cost around $1000 to extend the Ford bumper-to-bumper warranty all the way out to 100,000 miles – which I will probably go ahead and do. Am I a sucker, probably.. but I’ve paid more for the used car warranties in the past, and always had them cover repairs that totaled more than the cost of the warranty.
In any case, glad to hear you were able to get your machine repaired for a reasonable cost! :)
nc´s last post ..Fun with cameras and Photoshop..
Hind sight is always 20/20 they say. Should have, would have, and could have are all things you can say now but don’t fix the problem. The fact is if you are prone to doing things like spilling coffee on you laptop it may be worth it. Personally I don’t see it but I am also pretty good with hardware and can fix/replace most issues with a computer. The warranty for me would be limited to acts of my own stupidity, like dropping the laptop on the concrete. It is easy for me to say I wouldn’t pay for it though having not had an issue with any of my computers that I couldn’t resolve cheaply and easily on my own.
Kyle C.´s last post ..Holy Crap, I Suck… Or Not
I’ve actually dropped a laptop on concrete and had it survive completely. just a dent on the corner. I am definitely against warranties. only about 10-12% of the cost goes to cover the actuarial likelihood of the item breaking. The rest is profit. put that money in the bank and you will be much more likely to come out ahead. Unless you break just about everything you ever buy, you will come out ahead by not buying the warranty.
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You get what you pay for. A $400 laptop usually turns out to be junk. I’ve seen too many people buy these and they never last. spend more $ and get a better quality product.Don’t expect much for only $400
It depends on the relative cost and the manufacturer’s warranty.
For example, my husband was dying for a video chair. Every single one had a 90-day (or less!) warranty. So we paid an extra $17 and now the chair is covered for 2 or 3 years. And there are already some signs it may need to be replaced — a little over a year later. Given that the sucker $70 on sale, that’s worthwhile.
On a laptop, too, I would definitely get an extended warranty. But that’s because it’s harder to find someone able to fix a laptop. And I’m a huge klutz. I spill things, I trip… I just think it’s better to have accident coverage with me around.
But that’s the same reason that, when we were thinking of getting a second computer, I wanted a desktop for myself. It’s easier and cheaper to find someone to fix one. (It ended up being moot. My employer has me using one of his laptops for my work.)
That said, I wouldn’t ever get one for a car.
I think it really comes down to the relative cost and how specific the coverage is.
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Thanks for the overwhelming response of comments and advice! I believe Dell was offering me the CompleteCare as someone mentioned above. By the way, I’m scheduled to get my laptop back today. Again, this wasn’t the machine’s fault, just my clumsiness. So, my feelings in that I should have purchased the care/warranty package from dell are probably stemming from my frustrations with myself and that I had to spend a few hundred dollars more for my laptop than originally planned. So, I used some emergency fund money (one could argue whether or not this is an emergency) because I’m using the laptop primarily for my blogging business. It’s important to me. Now, going forward, I like the idea of saving for such incidents. Essentially, that’s what I did here since I used the emergency funds. I suppose a warranty might be good for a high dollar laptop, but reading your comments and thinking about this more, I believe I made a wise choice in not making the purchase. Once I receive my laptop today, I’ll continue to enjoy my cup of coffee while typing away, but make sure it’s a few feet away. Lesson learned (the hard way). :)