The Simple Dollar is running a series in which we re-evaluate Money Magazine’s “25 Rules To Grow Rich By”. One “rule” will be re-evaluated each weekday until the series concludes; you can keep tabs on the action at the 25 Rules index.
Rule #25: When you shop for electronics, don’t pay for an extended warranty. One exception: It’s a laptop and the warranty is from the manufacturer.
Most extended warranties merely serve to put more cash in the hands of overzealous retailers like Best Buy. They try to get you to get the “four year plan,” but most consumer electronics are designed right out of the box to last at least that long, as they’re designed now to last five to ten years before having significant problems.
So, the rule is correct in the general case. What about the specific case of the laptops, though? Should one purchase a laptop warranty?
A few years ago, the answer would have been an unequivocal yes. Laptops were in the process of moving from luxury items to essential workplace pieces and many laptop producers weren’t gearing up well for the market changes. Stories about faulty Dell laptop batteries and other things caused people to freak out and often demand laptop warranties, plunking down the extra cash.
Today, though, laptops have become a common consumer item. It’s crossed what I like to call the “Black Friday” threshold: if an electronic item is sold at almost every major outlet at a steep discount on Black Friday, it’s probably become a very common item and the manufacturers have geared up to meet market demands (and probably exceed them). It’s cheaper for the manufacturers to ensure some levels of quality right off the line, especially when they’re competing with other manufacturers; not only is reliability an important factor in the purchasing decision, but the return process is expensive for the seller. Better to spend a dollar or two more to make a more reliable device than deal with lots of defective reports once an item has reached a mass-market threshold.
Thus, I would chop off that final caveat and leave the basic rule in place.
Rule #25: When you shop for electronics, don’t pay for an extended warranty.
You can jump back to rule #24.