Sunday, January 27, 2013

Are TV extended warranties worth it?

Every store will try to sell you an extended warranty "service plan." Are they a good buy?

(Credit: Geoffrey Morrison/CNET)
An extended warranty on a TV appears, at first, like a decent idea. After all, TVs are expensive, very high-tech, and pretty complex, right?
However, dig a little deeper and you'll find that extended warranties are almost always a waste of money.
Lets break down the potential rationale for "extending" a warranty in the first place.
Perception: The factory warranty isn't great
This is true. Most factory warranties are a year on parts, and three months on labor (or sometimes a full year on labor, too). As you can guess, the labor is the expensive part. However, this isn't the whole story, as we'll see in the next part.
Fix: Many credit cards and even some stores double the manufacturer's warranty for free. Here's Visa'sMasterCard'sDiscover's, and AmEx's pages on the subject. The New York Times has a decent article on the subject.
Perception: Flat-panel TVs are fragile
This isn't true, at least not as far as warranties are concerned. Yes, you can easily break a TV by dropping it, kicking it, using it as a sled, etc. But the fact is that under normal usage, flat-panel TVs are extremely reliable.
Consumer Reports has HDTV repair information from 190,000 of its readers. Between 2008 and 2012, it found the average repair rate among the major brands for LCDs is 4.3 percent, and 4.6 percent for plasmas. Even if you expand that out to all the brands it had information for (16), the average rate of repair is only 6 percent. It figured the margin of error is in the +/-3 percent range. I'd argue the repair rate is even lower, as people with a problem are far more likely to complain. But now we're arguing statistics, and I'm no Nate Silver.
Even beyond flat-panel TVs being very reliable, most of the major problems you might encounter with a TV you're going to see in the first 30 days, which is well within the return policy of most retailers (though that's worth checking ahead of time). Of the potential problems that might manifest after the first 30 days, the majority of them will happen within the first year (when you're covered by the manufacturer).
Sure there are going to be stories like, "Well, I bought a TV and it broke," but keep in mind these are anecdotal. Just because one TV broke, doesn't mean all TVs break. Well, OK, all TVs do break, we're arguing about over what period of time.
Over time, your TV will age. It's possible the power supply or other major component will fail. This is true of any product. In my 10+ years of reviewing, I've had only a handful of TVs break. Every broken flat panel was dead out of the box, likely dropped by some over(under?)zealous delivery guy. Every single one.
Everyone remembers their long-lived CRT tube-TV, but remember, the TVs we all grew up with had decades of development to get them to that point. Incidentally, the one CRT TV I had for long-term loan blew up. Every reviewer I know who had that TV for long-term loan, theirs also blew up, in exactly the same way.
This is anecdotal, too, of course, and admittedly I don't have TVs for very long, but it says something, I think.
Fix: Statically speaking, your TV isn't likely to break. Check out "How long to TVs last" for more info.

I'll give you another anecdote. When I worked at Circuit City in college, we were required to offer extended warranties at the end of the sale. I don't remember specific prices, but I do recall a one-year plan on a VCR could cost upwards of 25 percent of the price of the product. A five-year plan on a pair of speakers? Pennies on the dollar. Which do you think is more likely to break?Perception: Warranties are cheap, so why not?

Well, I can't argue with you there, at least compared with how expensive they used to be. And "cheap" of course, is relative, as they're a lot cheaper than replacing the entire TV. But think about why they're cheaper now than they were. These underwriters aren't doing you a favor, they price their policies based on what the market determines. If TVs were breaking all over the place, the price would be higher.
And another thing, we were often paid more on the extended warranty than we were on the product. What does that say about the profit margin? The same was true with cables, by the way.
It's also important to check what extended warranties, regardless of price, won't cover. For example, they probably won't cover burn in. Most have a dead-pixel threshold. Got one annoying bad pixel? You're out of luck.
Fix: With most plans in the 10 percent range of the total price (depending on warranty length), they're not offensive, per se. But that's still over $100 on a $1,000 TV, which is not really a small chunk of change. Cheaper than replacement? Sure. But they're "cheap" because the warranty providers don't have to replace/fix many TVs. If they did, the plans would be a lot more expensive.
Bottom line 
Extended warranties are just insurance for your TV. The plan provider is betting you won't have to use it, and you're hoping the same thing. Flat-panel TVs have proven very reliable, so it's unlikely you'll need to repair a TV.
But if you're not comfortable buying something without insurance, don't let me stop you. Whatever helps you sleep at night, I'm for. However, if you're on the fence about extended warranties, just know that you're probably better off saving the money.
One final point. TV prices drop every year, while size, features, and usually picture quality, all increase. The first plasma TV cost more than $15,000. Now you can get a higher-resolution TV of the same size for $500. Let's say your TV does break in five years. You'll be able to replace it for far less money than you originally bought it for, or you can get something new that's even better. OLED perhaps, or maybe Ultra HD.
If you're not the type of person who likes the idea of replacing TVs often, and you're worried about reliability even though the numbers show otherwise, then by all means get a warranty. For everyone else, skip 'em and spend that money on something like a TV setup Blu-ray, which will make your TV look better.

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