Thanks for your purchase … It’s gonna break, y’know.

September 30th, 2006  |  Published in etc  |  3 Comments

WaPo on “extended warranties”:

Warranty Week, an industry publication, last year estimated that of the $15 billion in premiums charged consumers in 2004, $7.5 billion went straight into the pockets of the stores that sell warranties as their cut.

Of the remaining $7.5 billion, the publication estimated that $3 billion was paid in claims by the insurance companies that back the plans. On the other hand, according to the Insurance Information Institute in 2004, the U.S. auto insurance industry paid out $66 in claims for every $100 in premiums.

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.

Not being a big fan of saying “no,” the extended warranty phase of any purchase is one of my least favorite. Telling the clerk I don’t care to give out my phone number and zip code is a distant second, even places where the clerks have demonstrated a peculiar discomfort being told no. (Why should they care, right?)

For big-ticket items I depend on for work, like a laptop, manufacturer extensions make some sense, since they usually seem to involve priority handling from the manufacturer. Applecare service, for instance, has always been exemplary. I’ve received Apple service jobs back within 72 hours of dropping them off, even when the machine has had to leave the state. Same with an on-site warranty I got with my old Dell laptop, once I battled through the hellish level one support.

The in-store, third party warranty fulfillment houses, though, just seem like a bad deal premised on the idea that you’re buying a product you fully expect to break sooner than makes economic sense. The one time I caved and bought an extended warranty, I learned a lot about how these places work:

I bought a Minolta Maxxum 5 35mm SLR and a fairly inexpensive 300mm utility zoom to go with it. I paid for the extended warranty, which tacked another 15 or 20 percent on the price of the whole kit, and considered that good insurance for accidental drops or whatnot. A very short time later (but outside the 30 day window the store offered for returning defective goods by about a week), the zoom lens stopped working. I took it back to the store and asked for a replacement. The clerk wouldn’t replace it because when you’ve got an extended warranty, the product has to go to the warranty service to be inspected and “repaired or replaced at their option.” The kicker is that the warranty service in this case reserved the right to take up to six weeks to do that. Despite the fact that I demonstrated to the manager’s satisfaction that the lens simply didn’t work no matter what camera he connected it to in the store, since the extended warranty was provided by a third party, he was powerless to circumvent the process. So the camera I bought for vacation, which was coming up in two weeks, was useless and would remain so unless I bought yet another lens, the prospect of which shifted the manager’s mood from pitiless warranty lawyer to oily sales dude with neck-breaking alacrity.

So the next time someone offered me an extended warranty, I was already in a bad mood about them. I was talking to a clerk in an office store who sold me a new computer desk. We were waiting for my order to be rolled up. He asked if I wanted to bolt on an extended warranty because he happened to have the exact same model of desk and felt it only fair to tell me that while it did hold his computer and books adequately, it was prone to breaking for no good reason.

“They’re nice desks, but some of the screws and stuff are kinda shoddy and they just fall apart, so you probably want to have the warranty so we can fix that right up once it breaks.”

It was a masterful piece of upsell. You come in, buy the desk advertised as on sale, then you learn you can either purchase a warranty plan for an added 25 percent, or you can ask the clerk who just told you the desk sucks too badly to be taken home uninsured which he’d recommend instead among the many more expensive desks.

I gambled that the clerk was probably an idiot. His pitch was delivered in the halting, stuttering cadence of a stupid person who’s trying to learn to become a weasel, stamp out any remaining conscience that might be impairing that process, and perhaps frame his words carefully enough that any passing manager who’s also troubled by some sort of vestigial shame over working for a company that’s turned humble office accessories into an opportunity for a hard sell wouldn’t be able to take enough umbrage to intervene.

I took the desk home with no extended warranty, and it lasted as long as it needed to. The only problem I had with it was all the time I spent wondering if it’d someday collapse because the clerk wasn’t lying about shoddy screws.

Responses

  1. gl. says:

    October 1st, 2006 at 4:09 pm (#)

    did you read the post one of the guys at panic wrote about best buy’s numbers on things like “product replacement plans”? http://www.cabel.name/2006/02/retail-secrets-best-buy-wall-numbers.html

    they used to have them listed at the front of the store until they realized people knew what they meant & took them down: http://www.cabel.name/2006/06/best-buy-numbers-gone.html

  2. mph says:

    October 1st, 2006 at 4:43 pm (#)

    I remember that! I wondered why Cabel seemed so familiar to me when I first saw his DS Lite video tours. :-)

    The comments are priceless. Everything from embittered ex-employees telling all to angry defenders of The American Way telling us warranty refusers are self-important failures who’ll never amount to anything.

    I guess, though, my “I don’t want to talk to you” aura works at Best Buy, because I seldom get hassled there beyond the exploratory “milpew?” they drop on me when my back is turned. The only attempts at replacement/warranty plans come at the cash register, and they’re pretty mild.

  3. gl. says:

    October 4th, 2006 at 12:20 pm (#)

    “milpew” is my new favorite word. :)

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