Stuff You Should Know - Extended Product Warranties: To Buy or Not to Buy?

Episode Date: December 11, 2008

Statistically speaking, extended product warranties aren't generally worth the money, but there are some purchases that warrant extra insurance. Find out when it's smart to buy -- and when you should say "no thanks" -- in this HowStuffWorks podcast. Learn more about your ad-choices at https://www.iheartpodcastnetwork.comSee omnystudio.com/listener for privacy information.

Flooring contractors agree. When looking for the best to care for hardwood floors, use Bona Hardwood Floor Cleaner, the residue-free, fast-drying solution especially designed for hardwood floors, delivering the safe and effective clean you trust. Bona Hardwood Floor Cleaner is available at most retailers where floor cleaning products are sold and on Amazon. Also available for your other hard surface floors like stone, tile, laminate, vinyl, and LVT. For cleaning tips and exclusive offers, visit Bona.com slash Bona Clean. The war on drugs is the excuse our government uses to get away with absolutely insane stuff, stuff that'll piss you off. The cops, are they just like looting? Are they just like pillaging?

They just have way better names for what they call, like what we would call a jackmove or being robbed. They call civil acid. Be sure to listen to the war on drugs on the iHeart Radio App, Apple Podcast, or wherever you get your podcasts. Brought to you by the reinvented 2012 Camry. It's ready. Are you? Welcome to Stuff You Should Know from HowStuffWorks.com. Hey, welcome to the podcast. How are you Chuck? I'm good. This is take two. We rarely do two takes, but Josh messed up so bad, we have to do take two. Should we tell him what I said?

No. Okay. Because then we'd have to do take three. All right. Well, anyway, this is Stuff You Should Know. And as Chuck just said, it's Josh here and Chuck there. And we were talking earlier about how it's getting to be that time of year again. Right. The, it is the season. Time to go cut down a perfectly healthy tree. Prop it up like some sort of corpse in the corner. Hang things on it. Yeah, exactly. Decorate it. Yeah. Decorate it. Shuffle into the malls and turn out our pockets. Right. Buy things for your family and friends. Have the endless debate over whether or not Walmart creators should say happy holidays or Merry Christmas. Right. And just basically, you know, celebrate another year past of surviving. Right. That's what we do at my house is Christmas

is all about the survival of yet another year. Opening soup cans with pen knives and yeah, it's good stuff. Yeah. So yeah, I guess what Chuck and I are saying is the holiday season, it's upon us. And clearly the one question that always comes to mind for me is should I or should I not buy an extended product warranty? Right. And I know a lot of times our podcasts are really interesting tidbits that you can share the water cooler. Well, no, this isn't interesting in that way. But I think a lot of people don't know whether or not to purchase them because they're faced all of a sudden at the register and they're kind of in a panic. So yeah, we're trying to help you out here. Exactly. This is this is precisely why we're broadcasting this podcast.

Right. It is. It's I never knew. And once I found out, I was happy to know actually. Sure. Because yeah, it's become like this real high pressure sales pitch and it comes like when you're almost out the door and all of a sudden like, Oh, of course, you want the extended warranty, right? Right. I don't know. Do I? Right. It's like, do you want the apple pie at McDonald's? Yes. All of a sudden, you're thinking, I don't want an apple pie, but I want an apple pie. But I want an apple pie. And I got to say, you know, especially back when it was fried, I always wanted an apple pie. They're not fried anymore. No, they're baked. Oh, they're still pretty good. But dude, compared to the fried ones, like flaky goodness. Yes,

you can still get the fried apple pies at checkers, by the way, looking to get a warranty on the apple pie is what I want to know. You could maybe if you if you if you should probably not. Right. And that's actually one of the reasons there's several there's several that there's no definitive answer, whether you should or shouldn't get an extended warranty on a product. Sorry to break it to you. We can't just say no. And we'll get into some some reasons or some situations where it is a good idea to maybe opt for one or not a good idea. Right. We'll do both. But if you look at it from the law of averages across the board, it's a bad idea to buy an extended warranty. Right. Just statistically speaking, either the product you have is going to break within the first year,

which is covered by the manufacturers warranty that all items come with. Right. Generally. Yeah. Or it's going to break after, you know, the extended warranty has lapsed. Right. So either way, speaking just on averages, you're going to have just wasted, you know, X amount of dollars for something you'd never used. Right. It's really just an insurance policy, which again, is a form of gambling. Right. Right. And for the most part, an extended warranty is a losing bet. But there are some instances where you might want to stop and say, you know what, sales jerk, I am going to buy that extended warranty. Right. You want to give them a few? Well, I mean, first, this is the one I thought, you know, I'm stat man, a quick stat. Americans spend $16 billion a year

on warranties, extended warranties. Yeah. That's a lot of dough. I've got another stat for you that's going to pop your eyes out. Okay. 80% of that profit. Yeah. Only 20% of that 16 billion spend on warranties is ever shelled out in repairs or replacements. There is no need for the outside world because we are removed from it and apart from it and in our own universe. On the new podcast, The Turning Room of Mirrors, we look beneath the delicate veneer of American ballet and the culture formed by its most influential figure, George Balanchine. There are not very many of us that actually grew up with Balanchine. It was like I grew up with Mozart. He could do no wrong. Like he was a god. But what was the cost for the dancers who brought

these ballets to life? Were the lines between the professional and the personal were hazy and often crossed? He used to say, what are you looking at, dear? You can't see you. Only I can see you. Most people in the ballet world are more interested in their experience of watching it than in a dancer's experience of executing it. Listen to The Turning Room of Mirrors on the iHeart radio app, Apple Podcasts, or wherever you get your podcasts. The war on drugs impacts everyone, whether or not you take drugs. America's public enemy number one is drug abuse. This podcast is going to show you the truth behind the war on drugs.

They told me that I would be charged for conspiracy to distribute 2,200 pounds of marijuana. Yeah, and they can do that without any drugs on the table. Without any drugs, of course, yes, they can do that. And I'm the prime example of that. The war on drugs is the excuse our government uses to get away with absolutely insane stuff. Stuff that'll piss you off. The property is guilty. Exactly. And it starts as guilty. It starts as guilty. The cops, are they just like looting? Are they just like pillaging? They just have way better names for what they call, like what we would call a jack move or being robbed. They call civil acid. Be sure to listen to the war on drugs on the iHeart radio app, Apple Podcasts, or wherever you get

your podcasts. Well, should we just end the podcast right there? Exactly. Happy holidays, everyone. That sounds like your answer. That's pretty much speaking by the numbers, you're a sucker if you buy an extended warranty. Right. But there's some instances where you're not a sucker. Right. And actually, another stat for you there, Chuck, did you know that Circuit City, 100% of its operating income in 2004, as far as securities analysts were concerned, came exclusively from the sale of extended warranties. You're kidding. And I think something like, you know, they're going out of business now. So maybe that, yeah, should tell you something. Well, the problem is, if you're not selling electronics,

you're not going to sell an extended warranty. Right. If you're dependent, that dependent on extended warranties, then yeah, you're going to go under when the electronic sales plummet. No wonder they push it so hard at the registry, you know. Oh, yeah. It's big time. And Best Buy, actually, they, I think in that same year, 50% of their operating income came from extended warranties. Yeah. You know, I'm not allowed to go within 100 feet of a Best Buy. So they have everything you need. I wouldn't know. My wife won't allow it. She has a complete boycott going on. You don't know what you're missing, Chuck. They have everything. It's good stuff. But yeah, I'm not allowed. Actually, Best Buy also has extended warranties on absolutely everything.

There is a guy who, no, a gal, I'm sorry, who was writing for Business Week wrote an article on extended warranties that I came across. And she said that Best Buy sells a 49.99 four-year extended warranty on a Magnavox DVD player that they sell for $39.99. Wow. That doesn't make sense economically speaking. It makes no sense whatsoever. I don't know what Adam Smith would say about it, but famous economist. Oh, I know. Okay. He's one of my heroes as you're well aware. Right. So we got a little side to it. Yeah, we could sit here all day and punch holes in extended warranties and call you a goon if you've ever purchased one. Right. To each his own, though, that's kind of our unofficial motto here at Stuff You Should Know. Exactly. So let's tell

them some times when they should. Right. One reason I've got for you, Josh, is if it's a high dollar item, if you're going to spend several thousand dollars on an item like, let's say, you know, a big flat screen or something like that, it may be worth a couple hundred bucks to cover it a little longer. Yeah. Because I mean, you've already shelled out several thousand. What's the? Exactly. What's the harm? And this actually comes into play most often with rear projection TVs, which can run into several thousands of dollars. And apparently the typical rear projection TV, the bulb, right, using the projector is rated for about 5000 hours of use. Right. And if you buy an extended warranty, if you're an average American, you're going to watch

more than 5000 hours on that TV within that three year period. Right. That's a lot of TV, man. It is. But yeah, I think just, you know, speaking on averages and statistically, you're going to watch that much in three years. Right. So if when that bulb finally goes out, you'll be covered. So that's, that is a specific instance where it's a pretty good idea to go ahead and shell out an extra $400. Right. I know if you have a PC laptop or home PC, might also be a good opportunity to buy one because I think there's a 37 percent chance that it's going to need repair within that three year period. Yeah. And actually, PCs rank at the top for the, for needing the percentage that they'll need a repair in three

years. Right. And it's not cheap to get it fixed either. That's something else you have to consider. No. And those things usually come with tech support. Right. Which I think Apple, their tech support after, you know, their manufacturers one year warranty goes away. Right. Those, each call goes up to like 40 or $49. Right. And that's pretty much industry wide. They're expensive phone calls. So yeah. Well, they're, you're dialing straight to India. So imagine. Exactly. Exactly. Did you know that there's a McDonald's in Massachusetts where the drive through, you're actually speaking to a call center in Colorado? You're kidding. No, I kid you not. They outsourced the order taking and then the people typing in on a computer screen and then

back at the, at the Massachusetts McDonald's, your order is filled. It's mind blowing. That's what they call tangential. Right. Yeah. So okay. Let's, let's get back to times when you should get an extended warranty. Right. Cell phones. Yeah. I know you mentioned was a good one because they're easily breakable or lost. Yeah. If you are absent minded, if you lose stuff a lot, you probably want a spring for some sort of extended warranty specifically with the cell phone. Right. A lot of extended warranties won't cover loss, theft, or, you know, accidental damage. They'll usually cover, you know, some sort of manufacturer defect or if the thing died in natural death within this time. But the cell phone warranties are designed specifically for

people who lose their phones. So you're going to pay like five bucks a month extra. Right. And then you're going to be slept with a deductible when you, you know, call it in, but say it's a $400 Blackberry. Right. And your deductible is 125. You're still going to pay less than you would for getting that Blackberry. Right. So it's kind of up to you to do the math and to look at yourself in the mirror and determine if you're one of those people that forgets and loses and breaks. And that's our advice to you. Don't go into a store to buy a cell phone or a rear projection TV or anything else without doing some homework first. Find out if it will break right within, within that time or consumer reports action. Yeah, yeah, exactly. That's a very helpful site.

Yeah. And it's actually worth the subscription too. There's some really great information on there you can't get unless you're a subscriber. Right. So know the product, know yourself. And then when the sales guy says, Oh, yes, of course, you want the extended warranty, you'll, you'll know on the spot. Yes or no. Yeah, it's good to have your mind on yourself ahead of time. Exactly. And you won't have to second guess yourself. Right. If you do, if you do second guess yourself and you didn't get an extended warranty, but you decide that you want one, most states actually state law says that you've got 30 days to purchase an extended warranty for that price. Right. And I believe most states also give you 30 days to cancel it

after you get it. You should probably check with your state. I have no idea what state department would concern themselves with that. Right. But I'm pretty sure if you type in extended warranties into your secretary of state, there you go. I'll bet you that's it. If you type that into your secretary of state search bar, you're probably going to come up with something, right? Right. I would say so. Okay. There is no need for the outside world because we are removed from it and apart from it and in our own universe. On the new podcast, The Turning Room of Mirrors, we look beneath the delicate veneer of American ballet and the culture formed by its most influential figure, George Balanchine. There are not very many of us that actually grew up with Balanchine.

It was like I grew up with Mozart. He could do no wrong. Like he was a God. But what was the cost for the dancers who brought these ballets to life where the lines between the professional and the personal were hazy and often crossed? He used to say, what are you looking at, dear? You can't see you. Only I can see you. Most people in the ballet world are more interested in their experience of watching it than in a dancer's experience of executing it. Listen to The Turning Room of Mirrors on the iHeart radio app, Apple Podcasts, or wherever you get your podcasts. The war on drugs impacts everyone, whether or not you take drugs. America's public enemy, number one, is drug abuse. This podcast is going to show you

the truth behind the war on drugs. They told me that I would be charged for conspiracy to distribute 2200 pounds of marijuana. Yeah, and they can do that without any drugs on the table. Without any drugs, of course, yes, they can do that. And I'm the prime example of that. The war on drugs is the excuse our government uses to get away with absolutely insane stuff. Step out of piss y'all. The property is guilty. Exactly. And it starts as guilty. It starts as guilty. Cops, are they just like looting? Are they just like pillaging? They just have way better names for what they call like what we would call a jack move or being robbed. They call civil acid Be sure to listen to the war on drugs on the iHeart radio app,

Apple Podcasts, or wherever you get your podcasts. So now you know some instances when it's a good idea. When is it not a good idea? Well, no, I would say it's a bad idea. First of all, you should look at your credit card. Most credit cards, American Express and MasterCard will automatically ensure your item for an extended period of time upon purchase. The high end Visa and MasterCards, the more expensive ones, they'll ensure it. But I think all AmEx cards ensure. Yeah. Add an extended warranty on. Right. So you may be paying for something that's already covered. And another thing that we failed to mention earlier is because you're automatically covered for a year from the manufacturer,

you're paying for three years. It's not three years at the end of that one year. It's three years from the point of purchase. So you're actually paying for a year that's already covered anyway. By the manufacturer's warranty. Right. So it's a big scam there. It is. A three-year extended warranty is actually just a two-year extension. Exactly. On top of the warranty that you're getting. Right. You also have to pay for shipping most times, both ways. So if you're going to ship your cell phone to Verizon and then back, you might be spending more money and waiting on your phone. It might be worth it just to go in and get another phone. Yeah. And recycle the phone that you had. If you are, you know, so basically, I guess if we were to sum this up, we would say if you are caught

on the spot and asked whether you want an extended warranty and you can't make up your mind, go with no. If you decide that you do want one, actually purchase from the manufacturer. You don't want to purchase an extended warranty from a retailer. Sorry, big box of electronic stores because they basically take out insurance policies on each warranty and pocket a substantial amount of the money you've just given them. Right. The manufacturer's warranty should be a lot cheaper and there's no middleman for you to ship to. You can just deal directly with the manufacturer. Right. Plus, you have 30 days to consider it. So don't jump on the spot. Right. This Christmas season, remember the reason for the season, knowing whether or not you should purchase an extended warranty. Right.

I had a real bad experience with one recently. So let's hear it. Well, I'll just do it quickly here. You typically never buy them because I think it's a little bit of a sucker's bet, but I bought a kind of a high end washer and dryer from a store. Can I mention our producer Jerry saying shaking her head? No. So we will not. We will not mention the big box appliance store that I bought it from, but we bought the warranty, the washer broke and it took seven visits, seven separate visits that I had to take off time seven times from work. Wrong parts were ordered. Basically the problem was the company that they had contracted to fix it was awful. And this big box appliance store, their argument was take it up with them. My argument right back

to them was since you don't give me a choice of who to use, then they are you essentially. Sure. Right. And they didn't see it that way and they basically just quit returning my calls. I fixed it myself and they quit returning my calls. Wow. So yeah. So what did you do? Burn the store down anything? No, I'm going to go in and try and get my money back on the warranty at some point, but I will never shop there again. And I've tried to spread the word even though I can't do it. Yeah, there you go. Listeners, now you know what store to avoid. Apparently big box electronics store. If you see one with that sign hanging out front, right? Stay away. Okay. But stick around because it's time for listener mail, right, Chuck? That's right.

Okay. So Chuck, I get to read this one. Yeah. This one's from a guy named Alexander. This is complimentary, which makes me feel good. It is very complimentary. It was probably the highest compliment that's ever been paid to us via email, via electronic mail. Right. Alex writes to us from Edelboro, Massachusetts. And it's on the How Prayer Healing Works podcast. Alex says that he likes a podcast. He appreciated it. Knowing your love for all things scientific, I thought for sure it was going to be and it was going to be open season on any religious topic, especially prayer healing. But the fair and even discussion of the subject really speaks to your dedication to truth and discovery. I appreciate your discipline in applying the same high standards of research to this

topic, despite any of your personal opinions. That's real integrity and now have an even greater respect for your work. How's that? That's high praise, Chuck. And actually, he says that he's a Christian scientist and he gives extra kudos to you for knowing their preferred method of treatment and how the results would be different than prayer plus medical procedure. Right. So way to go, Chuck, way to go to both of us. Yeah. Made me feel good. Yeah. You should feel good, Chuck. We try and be fair and balanced. Forget Fox News. This is where it's fair and balanced. Exactly. Yeah. So if you want to let Chuck know, give him extra kudos, let us know we're fair and balanced. Tell us that you hate us because we are against big box consumer electronic stores. Send us an

email to stuffpodcast at howstuffworks.com. For more on this and thousands of other topics, visit howstuffworks.com. Brought to you by the reinvented 2012 Camry. It's ready. Are you? Be sure to listen to the war on drugs on the iHeart radio app, Apple podcast or wherever you get your podcast. We have a lot to talk about. Listen to the most dramatic podcast ever with Chris Harrison on the iHeart radio app, Apple podcasts or wherever you get your podcasts.