This weekend Tag and I went Christmas shopping for her dad. He is a science teacher by day and is basically the neighborhood handy-man on nights and weekends. He is always finding odd jobs and doing work for friends and family.
Tag bought him a power tool for his Christmas present, and when we purchased the item at check-out she was offered a three-year (I think) extended warranty for just over 10% of the purchase price of the power tool.
When it comes to electronics, extended warranties are usually a huge rip-off. Products usually come with at least a one-year manufacturer’s warranty, and then if it’s been working for a whole year and you take care of it, my experience has been that it will probably work forever. I did have a minor issue with my desktop computer a few weeks ago, but the problem was small and covered under the factory warranty.
Stupid Kevin Segue
When the PS3 first came out, my friends and I sat outside Best Buy for two full days to buy one so we could turn around and sell it on eBay for a profit. When I was at the cash register with my PS3, the cashier asked if I wanted the warranty for $100. I panicked! The guy told me it would make my PS3 more valuable on eBay and drive the price up. I was so dumb that I paid the extra $100 and then went home and put the PS3 online.
I soon found out that nobody cared about my warranty and my PS3 wasn’t selling for as much as I wanted. I did have someone bid where I would have made about $300 in profit. Instead of taking the $300, and I decided to pull the listing.
“Surely when we get closer to Christmas, people will be scrambling for a PS3 and I’ll get way more than $300.” Then Sony shipped a lot more PS3’s about two weeks later and people could easily get them for sticker price at any Best Buy. It cost me about $30 to pull the eBay listing, so I was down $30 at the time. Luckily I finally I sold the thing for $50 over what I paid.
In the end, I sat outside Best Buy for 48 hours to turn a $20 profit. What was I thinking? I encourage you to reconsider taking any financial advice from me at this time.
Warranty for Power Tools?
Unfortunately, I know about as much about power tools as I do about women’s clothing. The cashier offered the extended warranty and my initial reaction is to just say “NO!” I still think there is a huge profit margin built into those warranties and I probably made the right decision, but I wonder if power tools and electronics work the same way.
If you work with tools a lot, do you ever get extended warranties on your tools? If you aren’t handy, then I wanna hear your take on extended warranties in general.
Kevin McKee is an entrepreneur, IT guru, and personal finance leader. In addition to his writing, Kevin is the head of IT at Buildingstars, Co-Founder of Padmission, and organizer of Laravel STL. He is also the creator of www.contributetoopensource.com. When he’s not working, Kevin enjoys podcasting about movies and spending time with his wife and four children.
Extended warranty is a great deal only if it is free! I use this service my credit card provides. Don’t think I’ll ever purchase warranty.
In my opinion you did the right thing!
Yeah, I didn’t even think about the credit card thing. I have no idea what my cards cover.
Usually, they come with standard warranties of about a year or so. If there’s something wrong with how the power tool was built, you’ll usually notice it in the first year. Other times, credit cards can double the warranty period, so suddenly you’ve got a 2 year warranty with paying an extra penny.
So what you’d really be paying are those 3rd and 4th years and ask yourself if that extra $100 (or whatever it is) is worth the risk of it working for 2 years and then breaking sometime over the next two. In my opinion and experience, hell no.
Though if my 3 year old camera breaks in the next year, I may change my mind.
From what I understand, if something works for a year without having problems, it’ll probably work for a long time without problems.
I think it’s DeWalt, but one of the power tool companies now offers a Lifetime warranty on it’s tools. Careful what they actually cover though, since electric motors do burn-out after a while, and I’m pretty sure a warranty will not cover normal wear & tear. I.e.: the lifetime warranty is for the life of the tool – not your life.
Also, there’s a lot more power tool brands than there are manufacturers – most of them are built by Black & Decker. So don’t necessarily buy the myth that one brand is better than another until you’ve done some research. It may have been true in the past but not today.
Interesting note about Black and Decker. Again, I’m pretty clueless about tools. I know what a hammer is, and that’s about it.
Hahaha, another funny story from the Thousandaire. I haven’t purchased an extended warranty for over 10 years. The last one we got was on a massage chair. The Mrs. was worried it would break…. It’s still going strong.
I could use a massage chair right now. I’m super sore from playing PS Move. I know how lame that sounds, but “The Fight: Lights Out” is a workout!
Wow, props to the sales person!
How old were you when you waited for a game console? I used to enjoy, but I donno… no time anymore.
I got a 3 or 4 year extended warranty on my laptop. I probably wouldn’t have done it except that our house flooded and ruined my old one. The warranty from the store actually covered spills and acts of God. I was pretty emotional at the time, so I got it. I’ve used it 3 times. Each time I’ve been given a box for my computer, and had my computer back within 2-3 days. I think I’ve gotten my money’s worth out of it. I think it just depends on the user. Sometimes the store warranties cover stuff like dropping your phone in the toilet. If you know the phone owner is likely to do stupid stuff like that (my mom has done it more than once), then I think the extended warranty is worth it.
The other comments make me think I need to check out my credit cards and see what they offer!