Extended Warranty
Posted on June 16, 2006
Tags: Day Trading |
Should I buy an extended warranty or not?
Product: An Acer Laptop (Aspire 5562WXMi) very sweet spec and runs like a devil.
Cost: $1,470
Warranty included: 1 year Intl carry in
Extended Warranty cost: $220 ($110, or 7.5% per year)
Extended Warranty cover: Sold by Acer itself and covers year 2 and 3 carry in Intl repair. Main exclusions: physical damage/accidents, battery.
So, should I get it or is it a wate of money?
My old laptop, a compaq had a screen mulfunction just after 3 years (I did not have an extended warranty on it) and I replaced it at Compaq centre for about $300.
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5 Responses to “Extended Warranty”
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I think of it in terms of expected cost. What percent of laptops would need to fail for the extended warranty to save you money in the long run? In other words, solve:
$1470 + p($1470) > $1470 + $220
In english, that means, determine when (expected cost without warranty) > (expected cost with warranty). When I do the math, I get 15%. So, it’s a matter of whether you think at least 15% of Acer laptops will need to be replaced under extended warranty.
I almost always skip it. Also consider that, if you would be happy buy the SAME laptop again in 2.5 years, it will cost you MUCH less than $1470, if it’s even available at all at that time. So, if I took that into account, the math would be even further skewed towards not buying the warranty.
Of course I’m just providing information… not trying to influence you.
Thanks Richard.
I kind of think of it in terms of insurance. You pay a premium to transfer risk and gain peace of mind in case a problem eventuates.
In terms of buying the same laptop again a couple of years later - I most likely would be able to continue using the 2 year old laptop if it holds but if it doesn’t then I’d have to spend a replacement amount which is probably equivalent to what I paid for the current one.
You are right that piece of mind has value, too. Too bad you can’t buy put options on laptops, eh? :-)
Probably not worth it. If something is going to go its going to break in the first 12 months. After that, the next piece you would expect to go will be the hard drive, so it would be far better value to buy an external hard drive solution with the additional money and keep some sort of backup process going.
Just think, if something went wrong and it had to be sent away for several weeks for repair, what will you do with that missing data. Having a backup on standby will enable you to get going on a replacement system relatively easily.
‘mark’ is right about the ‘first 12 months’. Electronics failure-rate curves typically have a ‘bathtub’ shape, with high failure rates at the near (infant mortality) and far (aging) end. So extended warranties on a fairly reputable product are PROBABLY overkill.