Are extended warantees a ripoff?

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ellover009

[H]ard|Gawd
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Jul 17, 2005
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Just bought a PS3 at best buy I opted for the 2yr warantee, it was $100 should I get rid of it? The PS3 comes with a 1yr warantee. I'm thinking of marching in a getting my $100 back.
 
My opinion is that they are usually not worth but for something as expensive as a ps3 I don't think you made a terrible mistake, also it is hard to tell with such a new product, when it comes down to it if you can easily afford spending the $100 on the warranty then ok it was spent well but if you need the money for food (something important) then I would say go cancel the warranty. (don't go get your $100 and then go buy a giant bag of crack, or two kegs of beer, or 4 logs of skoal, or 2 cartons of cigs.)
 
Well I do think that 100$ is a ripoff. The 2 year BB warranty on the 360 is half that price, and it is 60$ from MS. I would see what your options are from Sony, if it is cheaper through Sony then return the BB one.
 
600 bucks for the PS3 + 60ish bucks for a game + whatever accessories you bought for the PS3 gives you 660+change.

100/660 = ~15%. 100 bucks is about 15% of 660. So you're betting that 15% of PS3s will fail after one year, because that's what you just paid for.

Now modify by your risk-aversion level, are you a risk-phile(<1), risk neutral(1), or risk-phobe(>1)? (A multiplier applied to the warranty's value to adjust for personal taste. If I like risk, I can use .8 and lower the warranty value because I don't mind the risk. If I hate risk, I can use 1.2 and increase value because I value the protection more than necessary. Risk neutral is ideal over time assuming you can accurately gauge the risk.)

What I did here was:
-Add up the potential damage of a risk.
-Divide the warranty by the damage to find the odds the warranty represents. (I'll explain)
-Modified by personal reaction to the risks (Is the PS3 more important to you than 660 bucks can represent? Do you hate returns/warranty processes? Etc. etc.)

Teach a man to fish etc. etc.

I may not have explained things perfectly, or even accurately, but perhaps wikipedia digging will yield something. (try "Hedge" or "Hedging" from the field of finance or economics.)


Explanation(I hope I get this right):
Let's say an object is 100 bucks. 25% fail, So if a warranty covers them, 25% of total sales will get refunded at seller's cost. So how much should the seller charge for the warranty to cover his losses? 25 bucks.

A warranty is a bet. The buyer wants to hedge his risks, the seller wants to bet that you're wrong in estimating your risk and to have you pay more than your actual risk.

Something to consider is that the manufacturer warranty is telling you that the manufacturer is betting you their product will last for that period. If they're wrong, they pay out the ass to cover all the returns. So they're putting their money where their mouth is.



This is the basic idea behind the futures/options market, where people make money betting against each other that a value will go higher or lower(where they usually do it to hedge the potential risks of their investments...which is just like a warranty!)
 
if you buy in store warranty , youll get a new ps3 in no time ... best buy will replace it themselve... with the 1 year sony warranty , you need to send it back and hassle with them...

i got a 1 year warranty at eb for my ds... best choice ever
 
arr4ws said:
if you buy in store warranty , youll get a new ps3 in no time ... best buy will replace it themselve... with the 1 year sony warranty , you need to send it back and hassle with them...

i got a 1 year warranty at eb for my ds... best choice ever
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You have to mail it in with the BB Product Replacement Plan as well. They only take it back in the store if it is within 30 days or something like that. Afterwards you have to go through a RMA process.
 
I would see what sony wants for their warranty. Also see if they have a flat rate repair like MS does. One of my friends asked me about it for the 360 and BB's warranty was like 60 bucks. I said either get the extended through ms or say fuck it. If it breaks it is 130 bucks. About double the cost of the warranty really you are out 70 bucks or so if it fails and you didn't buy the warranty. For that the friend said fuck it.
 
Compusa has the best program of all or at least the best I've found so far. The TAP program for replacement is a walkin with a bad product and walk out with a new box in 10 min.

If Best Buy is like that heck yeah its worth it.

I buy the replacement plan on ALL my video cards. I had a 'problem' with my 1800XT and I walked out with a brand new 8800GTS for $43.69. The price of a 1 year plan on the new card plus tax.

Mouse, speakers, monitors, sometimes power supplies. The retail price is a bite in the begining but replacing it once for the new model, almost for free, is worth it to me.

Best Buys replacement plan should be similiar. If is a service plan they may have to look at it first, if the condemn it then you get a new one. Service plans are not as friendly.
 
I NEVER opt for an extended warranty. Over the past five years I've probably spent well over 10k on electronics and the only thing that's ever gone out on me is my XBOX after about 2 years. And even that was partially my fault because I had the terrible habit of falling asleep with a DVD in and letting the menu play all night. Not surprisingly, the optical drive died.

Considering that I could have spent upwards of $750 on warranties for that equipment, I think I'm still doing okay.
 
FWIW Consumer reports recommends against extended warranties except for the most expensive HDTVs. The $100 policy to extend your PS3 warranty probably cost the store that sold it to you less than $20. The odds are against you having to use the warranty. Especially just a one year extension. Now if you could add a 5 year warranty to it for $100, I would consider it.
 
Ya compusa wins hands down for replacement plans. No questions asked is the best kind :)

You could throw it out a window and take it back and get a brand new one.
 
I normally don't buy warranties...

but i did buy a 2 year extension on my Xbox360 soley becasue of the heat issues i always hear...

but yeah.. i usually just go with the out of the box warranty..
 
For a X360 a extended warranty is a must, at least for me cuz it has died twice already.

I got the BB $100 warranty for the PS3 because I don't want to go through the same thing. Not sure if I want to keep it though. One thing to consider is that the PS3 is very shiney and if Sony sends back refurbished ones it may not be in mint condition on the outside. If you can live with that then I'd pass on the extended warranty for a store. Also I wonder how much sony would charge for repair because if they had the same prices as M$ then you might as well just wait for it to die and pay $130 since the BB warranty only works once anyway.
 
Stereophile said:
FWIW Consumer reports recommends against extended warranties except for the most expensive HDTVs. The $100 policy to extend your PS3 warranty probably cost the store that sold it to you less than $20. The odds are against you having to use the warranty. Especially just a one year extension. Now if you could add a 5 year warranty to it for $100, I would consider it.
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Unfortunately consumer reports contradicts it self, According to Consumer Reports on a different article (Nov., 2006), product failure rates for just the first three to four years of a product’s life are almost always in the double digits and in some cases reach a whopping 43%

id only by extended warrantees on high dollar items:
Appliances
high dollar electronics
any microsoft product :rolleyes:
vehicles (if you use it more then average)
 
codegrinder said:
product failure rates for just the first three to four years of a product’s life are almost always in the double digits and in some cases reach a whopping 43%
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Yeah but the point is, even if you're unlucky and the product fails, more of the time you come out ahead without buying the extended warranty. With most consumer electronics, if it's going to break it happens right away, or at the end of its lifespan. Now if you pay $100 for an extra year on the warranty and it fails during that second year, you come out ahead. But most people who buy that same warranty will never use it. You're taking a gamble by not extending the warranty but usually for the price offered, Consumer reports is saying to just spend that money on getting it fixed if it ever comes down to that.

Warranties aren't bad. Good manufacturers stand behind their products. The problem is retailers stepping in as middle men. They make 400% more profit on the warranty then from selling the actual product. Hence they have enormous incentive to push them on people. It's like the protective sealant and scotchguard auto dealers sell. As for appliances, I always buy Maytag and have yet to use their excellent warranty. ;)
I wouldn't purchase a product with a 40% failure rate. :eek:
 
I have yet to hear of many ps3 dying, but my friend has gone through 5xbox 360s. The 1080P patch bricked the last two.
 
Stereophile said:
Yeah but the point is, even if you're unlucky and the product fails, more of the time you come out ahead without buying the extended warranty. With most consumer electronics, if it's going to break it happens right away, or at the end of its lifespan. Now if you pay $100 for an extra year on the warranty and it fails during that second year, you come out ahead. But most people who buy that same warranty will never use it. You're taking a gamble by not extending the warranty but usually for the price offered, Consumer reports is saying to just spend that money on getting it fixed if it ever comes down to that.

Warranties aren't bad. Good manufacturers stand behind their products. The problem is retailers stepping in as middle men. They make 400% more profit on the warranty then from selling the actual product. Hence they have enormous incentive to push them on people. It's like the protective sealant and scotchguard auto dealers sell. As for appliances, I always buy Maytag and have yet to use their excellent warranty. ;)
I wouldn't purchase a product with a 40% failure rate. :eek:
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But most of the time the cost of repair is twice the price of the plan. most stores do not make the profit either there is usually a third party administrator for the warranteesp i know staples, bestbuy, office max, sams club. they all have a third party administrator.

anyways. i agree though dont buy one if you know your product is going to last. and really the only companies ripping us off are auto insurance companys. :D
 
I guess that I either have the luck of the Irish or simply don't break things. I have never spent a dime on any kind of extended warranty and I've never regretted it. Even though people warned me before I bought my plasma that they were finicky and very expensive to repair....I didn't buy an extended warranty and the thing has been rock solid perfect for going on 3 years now...and that includes a 200 mile move after I had it a year. The only tech gadget that has given me trouble in recent memory was a 7900GT this past summer....but lucky me I bought it from EVGA and they honor a lifetime warranty and even crosshipped a new one to me. I may get burned eventually by never buying a warranty (I have a 360 that works perfectly for now) but until then I will bask in the nice green glow of all the money I've saved through the years. :cool:
 
I got a 4 yr warranty on my 61" Samsung DLP because it covers the Bulb up to 4 of em.
So. I Will most likely get at least 2 of em before the warranty runs out. Definitely 1 as I will have it replaced, broken or not, right before the warranty expires. Warranty cost $500, Bulbs run 300-500 Ea. Cost effective if you ask me.
Most other electronics, Nope, no thanks.
 
Pay with american express it doubles the standard PS3 warranty of 1 year to 2! (1st year covered by Sony, 2nd covered by AMEX)

AMEX FTW! :D
 
Jasonx82 said:
Pay with american express it doubles the standard PS3 warranty of 1 year to 2! (1st year covered by Sony, 2nd covered by AMEX)

AMEX FTW! :D
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Having to pay the entire bill at the end of every month FTL :(
 
Don't have credit cards yet, I do have a debit card, I don't believe in spending money that doesen't exist it leads you to believe that you have deeper pockets than what you actually have.
 
joemama said:
Having to pay the entire bill at the end of every month FTL :(
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Thats not so bad. Then you don't pay interest.
There is the Amex Blue Card where you get the same warranty benefit and not have to pay your bill in full at the end of the month.

And about extended warrenties, I don't buy them unless the item I'm buying is a new model and very expensive. Otherwise, if an electronic device is defective, it will break well within the warrenty period. After that, the item will most likely become obsolete before it breaks.
 
GlimmerMan said:
Thats not so bad. Then you don't pay interest.
There is the Amex Blue Card where you get the same warranty benefit and not have to pay your bill in full at the end of the month.

And about extended warrenties, I don't buy them unless the item I'm buying is a new model and very expensive. Otherwise, if an electronic device is defective, it will break well within the warrenty period. After that, the item will most likely become obsolete before it breaks.
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would you have bought one for the ps3?
 
ellover009 said:
would you have bought one for the ps3?
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I don't have a PS3. But if I did buy a PS3, I wouldn't have brought the extended warrenty. The one year warranty is good enough for me. And I would have brought it with an Amex card.
 
GlimmerMan said:
I don't have a PS3. But if I did buy a PS3, I wouldn't have brought the extended warrenty. The one year warranty is good enough for me. And I would have brought it with an Amex card.
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Don't have any type of credit cards yet.
 
What if you bought it on a debit card with a Visa logo?

Also has anyone figured out if Sony offers a warranty?
 
Future Shop wants $109 plus taxes for 2 years, $129 for 3.

I have until January 21 to return/exchange it...if all goes well, so far it is *knock-on-wood* I'll skip the warranty and take my chances.
 
bembol said:
Future Shop wants $109 plus taxes for 2 years, $129 for 3.

I have until January 21 to return/exchange it...if all goes well, so far it is *knock-on-wood* I'll skip the warranty and take my chances.
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Atta boy...just roll the dice like I do and spend that extra money on games. :cool:
 
I buy the warranties sometimes, just depends on what it is and how much the warranty is.
Example, I bought a Samsung 19" CRT from BB and since all they had was the floor model, I bought it for $40 less and paid the $25 for the 3 year warranty.
Earlier this year the image started to look dull and soft and since I have 2 of those monitors I could tell that there was something wrong with it, so I took it to BB and told them the screen looked bad. They sent it to their service center, then it came back and they said it was fine.
Went there and told them that it looks nothing like my other screen and they gave me the money I paid for the monitor back, and used that towards the 2 19" wide LCD's I have now.

Now, for car stereo speakers I will always buy the warranty if they have the instant exchange like Circuit City had. $40 for 3 years for 4 speakers to me is a good price, since I usually went through one speaker every 6 months and I'd take the pair back and get a brand new pair.

Oh, and I also bought the extended warranty on my JVC SVHS deck I bought back in 92/93.
Deck was $900 and the warranty was $40/year and renewed it for a total of 5 years, so I paid $200 in warranty fees. But that $200 was well worth it since I used the crap out of that VCR 8 hours/day nearly every day when I used to watch TV, i'd record everything I'd be watching so that I could watch it later and skip through all the commercials.
Deck went in for service 6 or 7 times for a total of about $1200+ worth of work and parts.
One part was almost $300..
 
joemama said:
Atta boy...just roll the dice like I do and spend that extra money on games. :cool:
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In my case HD DVD's and BD's! I never bought warranties for my HomeTheater Components so why start with a $700 Console!
 
Think about it this way, when the unit is out of warranty, how much do you think one service repair is going to cost? figure in about $25 for shipping the unit with $600 of insurance back to Sony. Min. repair may be $100, so you are at $125 and you are even if you had bought the warranty. Now if the unit needs a major repair, then you are out more or if it needs to go in more than once.

Since this is a brand new high tech device that will most like get used a lot, I would opt for the 3 year warranty for $129 and if the warranty is transferable, this makes it better for resale of the PS3.
 
Get the warranty, and do a type of "burn in" on the console. If it'll run for the 1st 72 hours straight, without a problem, you'll probably never need a warranty, so you can return it then.
 
Being an ex best buy employee I would say GET the 2 year replacement plan. its not a service plan it is a replacement plan. If you check the fine print you will see that you can CASH IN your replacement plan at any time for best buy credit which means at 1 year and 11 months you cash in your replacement plan and get 599.99 best buy store credit and give them back your ps3. Then go to the gaming section and buy a BRAND new revised(probably) and possibly cheaper PS3 and get a new replacement. Rinse and repeat.....

Yes this works and is perfectly legal according to there rules. Peole just don't realize it.
 
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