maintanance agreements: threat or menace?

April 2, 2009 10:47 AM

I just bought a giant LCD TV and didn't buy the maintenance agreement. Now I feel that maybe I should have. In fact, I probably still can, although it would be some trouble.

The TV cost $1300. It's a Sony. The agreement was $100 for 2 years, and $200 for 5 years, I think. I've bought a bunch of them over the years for various appliances and electronic stuff and have never used the service once.

I was slightly pissed off at the point of sale because the salesman tried to get me to buy a $120 package of MONSTER equipment after we finally decided to buy the TV and I just felt like stabbing the a-hole in the back.

The salesman said that I couldn't change my mind on the maintenance agreement after purchase. However, I can return the TV within the next 30 days with no restocking fee. So presumably, I could return the TV and then purchase it again with the maintenance agreement if I were so motivated.

My question: are these maintenance agreements in general, and in particular, good deals?

posted by anonymous_account to shopping (11 comments total)

My understanding is that they are almost never worth it (although I always recommend that people buy Applecare for Mac laptops). Read this. You did right. Enjoy sweet buttery TV.
posted by Admiral Haddock at 10:53 AM on April 2

On average, you're better off not getting it. Extended warranties make tons of money for the companies who sell them, which means buyers of those warranties are getting screwed.

Also, Consumer Reports Warns Against Extended Warranties.
posted by Simon Barclay at 10:58 AM on April 2 [1 favorite]

Generally speaking, they are not worth it. According to this Business Week article, most appliance failures occur within the first year of operation when they are under warranty from the manufacturer, or after five years, when your extended warranty will have expired.
posted by MegoSteve at 11:02 AM on April 2

Are they really calling it a 'maintenance' agreement? So you get, what, free oil changes? Maybe they're being honest that they're not going to cover any actual repairs.

Whatever it is, skip it.
posted by sageleaf at 11:03 AM on April 2

Maintenance agreements are the primary profit center for most electronics retailers that offer them. They make far more profit on sale of a the maintenance agreement than on the sale of the electronics components themselves.

They are not good deals. They are a form of insurance where you are wagering that your new TV will break. The store has done the math and has calculated how often your component will actually fails. I'm simplifying a bit, but for the first two years, the store is saying that there's a 3.8% chance your TV will require maintenance ($50/$1300). That's almost 4 failures per 100 TVs per year! The actual failure rate during that time frame may be closer to 1/1000, if not significantly higher. Of course, not everyone buys a maintenance agreement, and not everyone who has a problem requiring service needs a replacement TV. In general, however, they wouldn't offer the maintenance contract if they were losing money on it.
posted by mosk at 11:03 AM on April 2

I have friends who always get reamed for not pushing the extended warrantees enough. In fact, it's a quota that's probably more important than their overall sales figure or returns ratio because it's almost pure gravy for the retailer.

That means it must be a losing proposition for the consumer.
posted by bonobothegreat at 11:06 AM on April 2

The maintenance/warranty programs offered by retailers turn out to be worthwhile if the following conditions are met:

1) Your item breaks
2) It breaks within the period of the agreement
2) The damage to your item is "covered" by the agreement
4) The retailer honours the agreement
5) You wouldn't prefer to have a new/upgraded item after yours breaks.

On any single item, you're just playing the odds with a service agreement. There's plenty of anecdotal evidence to suggest the above factors almost never come together satisfactorily.

If you look at a lifetime of big-ticket purchases, you will almost certainly save money if you never buy an agreement. One or two things you buy might break over the years, but replacing those few items out-of-pocket will cost less than buying an agreement on everything.

It's just like any form of gambling - you'll feel really good if your gamble pays off. But if your gamble was particularly likely to pay off, the house wouldn't have bet you in the first place.
posted by chudmonkey at 11:18 AM on April 2

Depends on what they cover and how long the original warranty is. In house service is also a plus.

Personally, for an expensive item like that TV that you conceivably would be using every day for 5-10+ years, I don't think $200 is overly expensive. (Depending on the cost of the TV). But again, read carefully on what is actually covered.
posted by wongcorgi at 11:25 AM on April 2

Call your insurance company and ask about a single-item policy. I have a few different big-ticket items (laptop, camera gear, etc.) insured separately from the rest of my generic Renters policy.

For approx. 1/100th the retail cost of the item annually (~$20/year for $2000 of laptop coverage) I'm covered against theft, accidental loss/breakage ("Oops! I dropped my camera into the ocean!") and random malfunctions ("Darned thing won't turn on, but it worked fine yesterday!").
posted by adamk at 12:15 PM on April 2 [1 favorite]

If you really want a warrant you might consider SquareTrade.

They are cheaper than your local store (looks like about $150 for 3 years for your TV) and from what I've heard have a pretty good track record. SquareTrade regularly has coupons floating around.
posted by barake at 2:27 PM on April 2

It's a Sony product, which means it is engineered to break down shortly after the warranty expires. So yes, buy an extended warranty. I've also heard good things about SquareTrade.

You might also check to see if the credit card you bought it with has any extended warranty protection. Platinum Visa cards and some American Express cards double the manufacturer's warranty.
posted by kindall at 5:18 PM on April 2