Don't let 30-second pitch sway you to buy warranty at checkout

firstful of dollarsBack in the day when Circuit City ruled the electronics market, I always braced myself for the salesman's strong suggestion to buy an extended warranty on whatever gadget I was buying. Circuit City is long gone, but other retailers -- Best Buy, Staples, etc. -- also offer the sales pitch at the checkout counter, when lines are backed up behind you and the 30-second explanation sounds like a deal but doesn't offer enough details.

It's amazing the number of questions that whiz through my brain as I stand at the checkout counter: Is it worth $30 or whatever for a warranty I may never use? Am I covered if I drop it by accident? How fast will it get fixed? Is the extended warranty through Staples better than what the manufacturer offers? I've never bought one, mainly because I don't like being pressured into a purchase so quickly.

If you've spent weeks researching a product before buying it, why buy a warranty after a 30-second pitch before researching the warranty?

Buying the extended warranty on the spot for the new iPhone, iPad, smartphone, computer, Kindle or any other electronic device usually costs at least 20% of the item's price, and covers two to three years, said Steve Abernethy, CEO of SquareTrade, which sells warranties online. SquareTrade's warranties are about half what they are at Best Buy, said Abernethy. Companies earn a third their overall profit from selling warranties, and half of the cost of a warranty goes to commission, he said.

"Circuit City only survived, as long as they did, with warranties," he said.

And even if you think the pushy salesperson is right, there's no need to make it an impulse buy. Go home and research extended warranty prices, and return to the store or buy it online, since most retailers give you 30 days to buy the warranty. Salespeople might fudge what the warranty covers, or might not know.

AppleCare doesn't cover drops and spills for iPads, for example. The manufacturer's warranty for many products often only covers ordinary failure and not human error, such as drops and spills. Check the fine print to see if "ADH," or accidental handling damage, is covered when buying a warranty, since most don't cover it unless you pay extra. Many warranties are paper intensive, requiring pages of paperwork to be filled out before getting a repair, much like how rebate cards are forgotten to be processed.

"That's the devil in the details that as a consumer you don't even think about until it's too late," Abernethy said.

SquareTrade ships products overnight and has a five-day service guarantee, he said. It also provides reimbursement for taking your Apple computer to an Apple store for repair if that's your preference.

Other than sending the product to the manufacturer yourself, your gadget is likely to repaired by a third party, not at the store where you bought the warranty. "Most retailers, you'll be calling another company," Abernethy said.

Most electronics have a three-year useful lifespan, meaning that if something does go wrong, it will be within three years, he said. What should an extended warranty be bought for? Consumer electronics with the highest failure rates are phones, with the iPhone 4 glass breaking 82% more than the iPhone 3GS. The typical $400 smartphone has a 30% failure rate over two years, he said. Cellphones are dropped and break so often that SquareTrade charges a $50 deductible for insuring them, a charge it doesn't have on any other product.

A warranty is a good idea for any portable device that can be dropped, be spilled on, fail naturally (laptop computer), or is large and expensive to fix (flat-screen TV), Abernethy said. It's not worth it for something that's inexpensive or is solid without many moving parts, such as a blender, clock radio or speaker.

Fern Edison, who works in public relations, bought an HP printer at a Best Buy store and regrets buying the $40, four-year warranty. She said she later bought a better warranty directly from HP, paying $25 for one that includes phone tech support, which her Best Buy warranty didn't cover. She asked Best Buy for a refund for the extended warranty, and got a prorated refund. Other than saving a few dollars, the best part of the deal with HP was exactly what anyone wants from a warranty -- a guarantee that it will replace her printer in a day if it fails.

Aaron Crowe is a freelance journalist in the San Francisco Bay Area.
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