The Truth About Extended Warranties

SAN FRANCISCO (06/23/2000) - The Truth About Extended WarrantiesThe spiel sounds good. But just what do you get for your money?

You know the drill. You're ready to plunk down some money on a state-of-the-art PC. You've run through a gauntlet of decisions, and just when you think you're done, here comes one more: "Do you want to buy an extended warranty to protect that purchase?" Sure you want to protect your purchase. And the pitch is appealing. "No matter what goes wrong, we'll fix it." Should you bite?

In the past, I've always said no. Experts say that if anything goes wrong with a computer, it's likely to do so right away--long before an extended warranty kicks in. And many PCs come with a three-year warranty that offers protection for most of their useful life.

But my real reason is skeptic's disbelief: Anything that sounds so comforting at the scary moment when I'm about to spend $2500 can't be a good idea. And some hungry salespeople oversell extended warranties and gloss over less expensive alternatives. A salesperson for a major national chain told me that his store's management "wants us to push the extended warranties. They tell us that's where they make most of their money. A lot of times your performance selling them reflects how many hours you get [to work]. So there is a lot of pressure."

At press time, the Florida attorney general's office was investigating the sales tactics Best Buy salespeople have used to sell warranties. The state is checking into allegations that salespeople misrepresented the manufacturers' warranties in order to sell the extended ones.

Not Such A Bad Idea?

So I've been a habitual naysayer when it comes to extended warranties. But after talking to a host of experts, I'm changing my mind, at least slightly.

Even Consumer Reports, which once advised its readers to "resist the offer of an extended warranty, which usually amounts to expensive and unnecessary insurance," has softened its stance. "We've refined our point of view over the years," says David Heim, the magazine's managing editor. "For certain kinds of products it makes sense: if it's expensive to buy, might be trouble-prone, and could be expensive to fix. In other words, a laptop."

Should you purchase an extended warranty for your new PC? That depends on the machine you buy, the quality of its standard warranty, and the potential cost of nonwarrantied repairs. Also consider how much you're willing to spend to escape paying for a repair nightmare that might happen--but probably won't.

Start by doing the math. A typical extended warranty sets you back 10 to 15 percent of the cost of the product per year of additional protection, but prices vary from retailer to retailer. Can't decide whether the premium is worth it? Try to get an idea of what you might have to pay for a repair if you choose not to buy the warranty. One source of useful information is our "The Price You Pay" chart accompanying this issue's "PC Repair Undercover" feature, which details costs for the most common PC repair jobs. Keep in mind that many shops charge at least $50 to look at a computer and determine what's wrong with it.

The upshot: The cost of an extended warranty will probably exceed what you'd otherwise pay for a minor repair such as replacing a faulty video card. But if your system suffers a rare catastrophic malfunction such as a motherboard failure--or goes into the shop repeatedly for various problems--you may be glad that you extended its warranty.

Put It On Your Card

One Fact No salesperson will tell you is that the retail store's pricey warranty isn't your only option. If you have a premium credit card such as a Visa International Inc. Gold Card or American Express Co. Optima, you may already have the wherewithal for an extended warranty at no additional cost, right in your wallet. Simply by paying for your PC with that card, you could gain an extra year of warranty protection. (Check your card's member agreement for details.)If that's too little protection for your needs, you can probably buy more coverage from your card's provider. This type of warranty may offer such extra features as phone support that you can call on if you can't get through to your manufacturer's help line. So before you pay a PC vendor for an extended warranty, make sure you know what your credit card offers--both for free and for a fee.

Get Your Warranty Online

shop for a pc online these days, and you're likely to face the same question

you'd get in a store: "Do you want an extended warranty with that?" But at

least on the Web you don't have a commission-hungry salesperson trying to

strong-arm you into buying it then and there. Instead, you can read a plan's

fine print at your leisure before making a decision.

Third-party warranty sites such as WarrantyNow.com even let you buy an extended warranty for a PC you already own. Or you can go to Warrantynet.com, tell it what kind of computer you have or are buying, and get bids from multiple warranty vendors. (Pay attention to what each warranty covers--and especially what it doesn't--rather than just to the price.)Even if you plan to buy retail, go online before you go shopping. First, check the Web sites of retailers on your shopping list for warranty plan details; then get quotes from third-party warranty providers. That way, you'll know in advance what a store's warranties cost, what they cover, and what your other options are.

No Peace Of Mind

One Last consideration: Though extended warranties sometimes make sense, they merely protect against the cost of repairs. No plan can guarantee that your PC won't flake out at the worst possible moment or that getting it fixed won't devour your precious time (and data).

Consider the story of Robert Barcik of San Francisco. When he bought a Compaq Computer Corp. laptop at Circuit City Stores Inc., he elected to pay $300 for an extended warranty plan offered through GE Warranty. The salesperson's spiel sounded compelling: If anything went wrong, the computer would be fixed. If it needed to be repaired more than three times, he'd get a new one. Says Barcik, "I bought [the warranty] because I didn't want to worry about finding a service place--I just didn't want to worry."

As it turned out, his laptop did break down--repeatedly. Barcik had to bring the computer to Circuit City, wait for it to be repaired, then bring it in again. And again. After Barcik's third trip to the repair center he learned a crucial fact: The laptop would be replaced only if it broke down three times for the same problem.

Eventually, Compaq stepped in and fixed the notebook to Barcik's satisfaction for free, even though its original warranty had expired. But by then, he says, "I would have preferred to take a sledgehammer to the thing." The extended warranty couldn't save him from months of trouble and wasted time. It could only protect him from having to pay for the repairs. And that's all any of them do.

Now, if the day ever comes when an extended warranty possesses the power to stop your computer from eating a week's work or from seizing up as you try to purchase 1000 shares of Cisco Systems Inc., that's the day when I'll wholeheartedly say: Buy it!

Christina Wood is a PC World contributing editor.

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