Tuesday, June 19, 2007

A warranty on my mouse? Um, no

I recently went into Best Buy to purchase a $20 mouse for my computer. The cashier offered me a $5 extended warranty on it. I of course declined; here's why.

The mouse itself already has a warranty with the manufacturer. The only benefit that $5 would get me is being able to return it to the store and get it replaced instantly. However the likelihood of it failing within the 1-2 year term is pretty slim. Rather, it would be in my best interest to 'self insure' all of the electronic products. For each product I buy, if I take the warranty price and put it into a savings account, not only will I statistically have enough money in there to replace any of the given items should one of them break but I will also be earning interest on the unused portions of my warranties. My self warranty also never expires, plus the item value at the beginning of the warranty (at purchase) is going to be less than at the end of the warranty.

This applies to everything, from mice to flat screen TVs and laptops (though I would never spend money on a flat screen TV). It is cheaper to self-insure than to accept a big box store warranty, especially since the warranty is already covered by whoever made the product and included in the MSRP.

Best Buy and all of the other stores (all of them) sell these warranties because they rake in huge profits from it, the same reason they all want you to sign up for a credit card. Heck, a good chunk of the price of the warranty would have gone directly to the salesperson. My $5 warranty would have given him about $1 in commission, yet the store is still making huge profits from the 80% left over. Don't fall for their sales pitches. If you really believe in extended warranties, pay it to yourself.


X-er said...

I don't buy the warranties either. If an electronic gizmos is going to fail it will do it fairly quickly.

I have one exception to this rule. I have started buying them on appliances.

Appliances used to be built to last. You could count on them running for 10, 15 even 20 years without any problems.

The ones built today are crap. The brand and price range doesn't seem to matter.

Two service calls and the contract is paid for. I started doing this just within the past few years and have had made use of them.

Maybe I just have had bad luck.

Jim said...

Warranties on items that are relatively inexpensive and easy to replace are not worth beyond the normal manufacturer’s warranty. Most of the warranties they sell in stores are just to make the extra money. It is another way to get more dollars out of you when you buy something. This reminds me of my sales job in college trying to convince people to buy this crap while buying cheap TVs, DVD or VCR players.

I do think they're important to buy for things like vehicles, computers, and expensive small electronics like iPod, camcorder, digital camera, and certain appliances. These things become cost saving once you actually use them, so until you do use it, you spent more money anyways. I would not buy a warranty on something used though because it is cheaper anyways and a warranty almost breaks the deal.

Heather said...

No, the warranty price doesn't go to the salesperson. They're all hourly, nobody at Best Buy makes commission.

Beyond the Consumer said...

I worked for CompUSA myself many years ago, and knew employees at CircuitCity and Best Buy, their competition. These warranties were all the same deal. Every salesperson was hourly, but you were awarded a 'bonus' for each warranty you sold. That included the salesfloor folks as well as the register cashiers. At my store, managers would even give freebies to anyone who sold a certain number of warranties in a single day. If you added a warranty to a laptop, you would see an extra $5 on your paycheck, and so forth. Most definitely part of the warranty price goes to the salesperson.

Unless there has been a huge change in their policies, which I doubt since every salesperson I meet in these stores is still rabid over adding those warranties!