What Consumers Should Know About Extended Warranties and Performance Service Plans for Electronics

If you’ve bought anything substantial from a major electronics chain like Best Buy, Circuit City, or Frys Electronics, you’ve probably been asked repeatedly to purchase an extended service plan or an extended warranty. Hopefully you’ve always said no, but if you’ve purchased one before or are considering doing so in the future, there are some disturbing facts that every knowledgeable consumer should know.

Electronic stores make more money off the extended service plans than any other product. The plans themselves don’t cover any accidental damage. That includes anything they determine could have be caused by accidental use, even if it wasn’t. Although the sales counselor will tell you they are very reasonable, that’s not necessarily true. If they can justify not paying for the repair, they will. If your laptop screen cracks, don’t expect them to fix it.

Most of the repairs actually needed do occur within the manufacturer’s warranty period and thus are covered. So even if you buy the service plan and your product breaks you may still have to deal with the manufacturer directly. This is especially true on the smaller replacement protection plans and on some computer service plans. Production maintenance fees are not covered either. For example, they won’t fix your TV if it becomes discolored from magnets being too close.

In the average computer service plan, the first year is covered only by the manufacturer’s warranty and it isn’t until after that year is up that the store’s plan even goes into effect. If you have any problems in the first year, you may not be able to deal with the store you bought it from, but you will still have to call the manufacturer.

Even if your item breaks outside of the manufacturer’s warranty and you have the service plan, you will have to wait for it to be fixed. This could be weeks while the slow service center fixes it. In many cases, this wait is much longer and of lower quality then a retail repair shop, because they’ve already made their profit on you. I personally remember customers having to come back 2 to 3 times before their products were adequately repaired.

Sales counselors at electronic stores are instructed to continue to push you into buying these plans until you’ve said no at least three times. The presentation itself consists of planting emotional “seeds” throughout the sale that can be “reaped” at the time of check out. The “seeds” are to try to make you feel nervous about the possibility of your new toy breaking. This usually comes in the form of talking about how much use you will give it, the extremely short manufacturer’s warranty, a personal antidote about a problem that was fixed because a customer had a service plan, or generic talk about how things aren’t made like they used to be. The plans usually cost between 10% – 20% of the original item purchase price, but this price will probably be broken down into a per month, per week, or even per day price to make it seem like less.

Sales Counselors are fired if they do not sell a certain percentage of these plans and the percentage required is very high. When I worked for one of these chains, if we didn’t sell at least 5% service out of all the items we rang up, we got lectured and threatened. If that continued we were let go. At one point the general manager forbid us from closing a sale out without calling a manager if the ticket did not contain service. So we had to make legitimate customers wait for a manager to come and try to pitch them yet again before they could take their products and go.

The odds of coming out ahead with an extended service plan or warranty are definitely stacked against you. First of all, (contrary to what the sales counselor may try to tell you) most items do not break in a 5 year period of normal use. Second, since they literally cost 10-20% of the purchase price of the item, this amount will actually cover most minor repairs. If you buy a lot of electronics the warranty costs will quickly add up to enough for a full replacement even if 1 out of every 6 items fails. The plans themselves don’t cover “cosmetic” and minor problems. The stores decide what constitutes a needed repair. For example if some of the pixels die on your laptop screen and it’s annoying you to death, but most of the screen is still visible, they probably will not repair it for you.

I worked for a major electronics retailer for one year and feel sorry for all the people I encouraged to buy these plans. I was working my way through school and hope this article in some way makes things right. The internet is full of horror stories of people who bought the extended service plan and on top of that, actually had a problem and still didn’t get their product fixed. Best Buy was even sued in 2005 by the state of Wisconsin for alleged mistreatment of customers, which included not honoring their service plans.

My advice for buying electronics is to read up on reviews and consumer oriented websites and periodicals. They rate items in many categories including durability and will also give you an idea of what product is actually the best without having to listen to a salesman who has to make the numbers. Don’t let yourself be pressured into buying any type of extended warranty or service plan. They are almost never worth it.

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