The Pros and Cons of Extended Warranties 
Home Theater Feature Articles Other
Written by Jerry Del Colliano   
Saturday, 01 April 2006


The Pros and Cons of Extended Warranties
By Jerry Del Colliano
April 2006

Anyone who has ever purchased an electronic device or component of any kind in the last 20 years has been offered the chance to buy an extended warranty. The question still remains as pertinent today as it was years ago: are extended warranties worth it? The simple answer is: it depends. In the old days of high-end audio and stereo you made investments in analog devices (speakers, amps, preamps, turntables, tube television sets), which were either awkward to move or were likely built with expensive analog parts. Today’s home theater systems are built more like computers and have lifespans that reflect more on the disposable nature of their processors than the analog nature of high-end audio components of years gone by.

Not All Warranties Are Created Equal
When researching an audio-video investment, you should consider all of your options, as well as the likely lifespan of the product. The days of your first-generation VCR lasting you 18 years (not because you used a $40 head cleaning tape in it) are long gone. In the seven-year lifespan of DVD (amazingly it’s only been seven years), it is likely that you have invested in more than one DVD player for your system. Features change and prices drop, making home theater components more disposable, especially on the lower end of the spectrum of gear. For example, looking at an Asian-made mid-fi DVD player at $1,000 vs. one from the likes of a Meridian for many times more money, you have to weigh in the fact that Meridian has a proven track record for software and firmware upgrades, as well as a longer warranty than the more commodity-driven player. Oh, and the performance is way better, too – but that is what you are paying for when you invest in a high-end component. Dealer support, reliability, performance, warranty and beyond is what you should absolutely expect on the high end. If you find that your performance needs are met at the lower end of the spectrum, then you might consider a cheaper player.

Assuming you invest in a cheaper player, you still have the question of whether you want to invest in a warranty on top of that. To help with the decision, I would look at a lower-end investment like a computer. How long will you use it? If it is only a few years, then you need to weigh the percentage cost of the warranty to the player. If it is more than, say, 15 to 20 percent of the overall cost of the player, skip the warranty. There will be a better player available when you need it for the same or less money. Another factor on the lower end of gear is the actual time it takes to service a product. Packing it back up (did you save the box?), dealing with the service center, de-installing and reinstalling the component and the cost of the lost entertainment during the downtime due to missing the component are all factors in whether you want to simply replace a component. Back to the higher-end gear, this is why you buy the gear from a top dealer and/or installer. For the money you paid, you should expect them to do the dirty work of getting your system running in the event of a problem. You might even expect a loaner while you wait for a repair. If you invest enough money (over say $100,000), I have heard of dealers who will send technicians to oversee your system for parties, replace projectors before the Super Bowl and beyond. While some people think paying $5,000 for a DVD player is insane when you can get a “DVD player” at Costco for $100, there are unquestionable advantages, even outside of sheer audio and videophile performance, to buying the expensive stuff.

Logistics
The idea of buying a warranty for your HDTV in your living room that is used by every member of your family, each and every day for six to eight hours per day, has its merits. The amount of use and the size of the component make it difficult to just drop off at a dealer. Ask whoever you are looking to buy your set from about their service. If you are looking at a 61-inch rear-projection HDTV or a 220-pound 34-inch tube CRT HDTV like I have, you want to know if they are coming out to either pick up your set for repair or making the repair on the premises. If they are taking away the set, do you get a loaner? Do you need one, assuming there are other TVs to watch around the house? Does your repair company farm out their service or have their own technicians?

The value proposition remains the same: if the cost of the warranty isn’t too expensive and the dealer offers good service, it could be very well worth your time and money to invest in an extended warranty. AVRev.com’s Bryan Dailey popped for a $300 warranty on his JVC HD-ILA rear-projection set because he got five years of coverage for 10 percent additional cost. The deal was fair and, if anything did go wrong, he was covered nicely.

Fear Not the Negotiation
Make no mistake in understanding that extended warranties are the single most profitable sale in the store. Managers push and push and push salespeople to sell you warranties. Because of this, you can often negotiate a lower price on the warranty. Many years ago, when I was a teenager, I worked for a chain of stores in Philadelphia that encouraged the sale of warranties on everything. In my audiophile snobbery of days past, I refused to sell them on certain components, such as speakers. I felt that for $1,000, you shouldn’t need extra protection for speakers. The additional money was better spent on a more powerful amp or receiver, since speakers are never blown from too much power. Problems are caused from too little power. Cables provided additional “attach sale” opportunities to make sure the profits on my sales were nice and high. Executives above my manager loved my cable sales, but scolded me for not selling enough warranties, eventually causing me to leave and go to work for the cross-town rival. Resellers take warranties very seriously, I learned at the very young age of 16.

When getting close to pulling the trigger on a deal at a retailer, fear not asking for a price break on the warranty. At that point, any salesman with a brain attached to his skull will ask you the close: “If I can get you the warranty on this HDTV for $300 down from $500, will you do the transaction today?” This tests your seriousness and, if you are serious, then you have nothing to worry about. You may find a retailer willing to drop the price of a component or a set lower than you might have expected to sell you the warranty, and at that point, what do you care? They may sell you a plasma at cost just for the lucrative commission that comes from the warranty. As long as the deal is good for you – do it.


Conclusion
It is too myopic to suggest that you shouldn’t ever invest in an extended warranty. You do want to shop for the best deal and consider warranty, service and support as part of the overall value proposition. I buy Apple’s Apple Care package for $2,000 G5 desktop computers for AVRev.com, because I know that I get premium service at my independent Mac reseller in West Los Angeles. I also get a slight price break on my computers and an even bigger price break on other more expensive items that are attached to the sale at the time, like a few gigs of RAM or some software. At other times, I either invest in higher-end products that come with good service and support or simply risk it. Not getting a warranty for the recent acquisition of an HP fax-printer-scanner for $699 turned out to potentially be a mistake, but a better version of the unit was available for $399 and was plugged in waiting for a three-year ad deal to come in via fax that next morning. In that instance, the cost of downtime simply wasn’t worth waiting for a repair when we didn’t have a backup ready to go online.

In the end, use your good sense when investing in warranties. Be fearless in asking for a break on the price, considering how profitable they are for big retailers. The right deal just might save your butt.





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