Extended warranties. Worth it?

Discussion in 'Digital SLR' started by Sheldon, Jan 20, 2005.

  1. Sheldon

    Sheldon Guest

    When I ordered my D70 they were really pushing a 3 year warranty at about
    $130. I passed, but I still have 30 days to change my mind. IMO it looks
    like a lot of these warranties have many loopholes in them, including not
    covering the lens. Also, I get a one year warranty, and it's hard to
    believe I'd have more than one $130 repair in the next two years.

    Any thoughts? Experiences?

    Sheldon, Jan 20, 2005
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  2. Sheldon

    DoN. Nichols Guest

    How about opinions?

    1) The lifetime of a product has three phases:

    a) Early life, during which "infant mortality" failures
    can occur. These include early failures of transistors
    or more complex chips from weak wire bonds, cracks in
    the chip which propagate into the active areas, or just
    poor solder joints elsewhere in the equipment.

    b) Main life -- failure rate is extremely low.

    c) End of life -- things are starting to wear out, and
    failures (especially mechanical ones) become more frequent

    2) In my opinion, the 1 year warranty will cover the "infant
    mortality" failure period.

    3) Also in my opinion, the three year extended warranty will
    expire *well* before the "end of life" period arrives.

    4) Of course, this does not mean that you *will* not have a
    failure in the "main life" period. I consider it quite
    unlikely, but some do happen. How unlucky do you feel?

    5) Put a tether on the protective cover over the image display
    screen. The screen is fragile, and *very* expensive to replace,
    so you want to keep it covered.

    I suspect that the extended warranty does not cover a broken
    display if it is broken from impact with a belt buckle or the
    like. If it remains intact, and just stops functioning, that
    would be a different matter. In any case -- I would rather
    protect it than to pay extra for a warranty which *might* cover

    The protective cover tends to hook on belts and such and pop
    off. I lost the original one (it popped off during a hamfest,
    when I was walking around a lot, looking at things, and I could
    not locate it, even after retracing my steps carefully). It
    took over a week to get a replacement. I immediately made a
    tether for the replacement, which runs from the small hole near
    the left bottom of the cover to the attachment of the left-hand
    end of the neck strap to the camera. It has caught and saved
    the protective cover at least three times since I installed it.

    So -- *I* did not buy the extended warranty. I have Nikon F
    cameras still in perfect working order, so I expect a good lifetime on
    the D70. I *may* be proven wrong, but you have my opinions. The D70 is
    mechanically simpler than the Nikon-F, with no film transport mechanism
    to fail -- though it does have the motor connection to the lens focus

    Also, I believe that the shutter is not as highly stressed, as
    the mechanical shutter only has to uncover the entire focal plane before
    the electro-optical shutter does the real exposure control, so it does
    not have to work over as wide a range of speeds.

    Good Luck,
    DoN. Nichols, Jan 20, 2005
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  3. Sheldon

    Stacey Guest

    Most extended warranties cover the parts of devices that never break and
    cost more than most repairs would cost and you pay up front. I never buy
    them on anything. If it's such a POS that a 1 year warranty isn't good
    enough, I wouldn't buy it anyway!
    Stacey, Jan 20, 2005
  4. Sheldon

    C J Campbell Guest

    From a business and economic point of view, any warranty is really an
    insurance policy. All businesses regard warranties as profit centers. You
    were forced to purchase a one year warranty with the camera -- it was
    included in the price. Nikon unquestionably made money on this warranty.
    Whether it was worth it to you is a moot point. You own it.

    An extended warranty is usually offered by the retailer. The warranties are
    covered by insurance companies who pay the retailer a commission on each
    sale. The insurance companies themselves expect to make a profit on the sale
    of these warranties. It is possible that even Nikon's warranty is actually
    being provided by an insurance company that paid Nikon a commission on the
    sale of the warranty. The insurance companies themselves buy and sell blocks
    of these warranties from each other on the open market.

    The typical warranty is very expensive insurance. Even if the insurer has to
    pay a total loss, it is buying a replacement from the manufacturer at
    wholesale, or it is buying a product that has been 'refurbished,' sometimes
    at the manufacturer, sometimes elsewhere. You will never know. So figure
    that even with a total loss, the insurance company is out about half the
    value of the camera. Even if one in ten cameras is lost (a rather generous
    estimate), the insurance company will have to pay out only about $500 for
    every $1300 it collected, less commissions and other expenses.

    But it gets better: they collected the $1300 up front, and they only have to
    pay out the $500 averaged over three years. Another way of saying it is that
    the true expense to the insurance company is the present value of the $500
    in eighteen months, or about $450 at current returns. Meanwhile they are
    earning a return on investment on the whole $1300.

    Now then, let's consider the real cost of this $130 to you. First of all, if
    you live in the United States, you had to earn about twice what anything
    costs you. This is because, one way or another, half of what you earn is
    taken away in taxes. If you are poor, it is taken in hidden payroll taxes,
    sales taxes, and property taxes. Maybe you are so poor you don't pay any
    income taxes, but don't think for one minute that you don't pay taxes: you
    are getting soaked one way or another. If you are rich, these other taxes
    are smaller, but your income tax is bigger. No matter who you are, you pay
    half your *earned* income to the government. If you live anywhere but in the
    United States, you probably pay a lot more. So you have to earn $260 in
    order to be able to spend $130 on a warranty. It also means that if your D70
    breaks and you have to replace it completely, you have to earn $2000. If you
    are an idiot, and financed your purchase with a credit card, you can double
    all these amounts again. (And people wonder why they can't get out of debt.
    Here you are earning the national average of $40,000 a year, and you can't
    pay for a $1000 camera. Well, that is because you paid for it with a credit
    card, meaning that you spent more than a month's wages on that camera. Do it
    for a few other items and it really adds up. It sure doesn't leave much to
    pay the rent or groceries, does it?) Of course, if you financed your
    purchase and your camera breaks, you have the extra pleasure of continuing
    to pay for a broken camera. And pay. And pay. :-(

    Now you're thinking, "Damn, I should go into the warranty business." A good
    idea. Why else has every retailer on earth gone into the warranty business?
    Of course, they grab off all the suckers, er, customers before you can get
    to them, but if you can figure out how to do it and meet all your state and
    federal insurance laws, then more power to you.

    But you can go into the warranty business in a small way. Figure out the
    cost of buying a warranty on everything in your house. Put 10% of that
    amount away in an investment account every year. Do it on a monthly basis.
    This is your "if it breaks, I'll fix it myself" account. My guess is you
    will make a big profit over what you would have spent on warranties. Not
    only that, but you will be increasing your unearned income, which is taxed
    far less than your earned income -- no FICA or employment taxes on unearned
    income, for example. Put another way, a penny saved is two pennies earned,
    and four pennies borrowed. (Kinda makes you wonder if the Nikon is really
    worth $200 more than that other camera, doesn't it? Now that you know you
    had to earn $400 or more to pay the difference...)

    I don't want to leave you with the impression that insurance is always a bad
    idea. You should buy insurance for losses that you have no way of recovering
    from. Few people, for example, can recover from the loss of their home to
    fire. You should insure against that. But a single camera? Might want to
    think about that.
    C J Campbell, Jan 20, 2005
  5. Sheldon

    Larry Guest

    Many years ago I worked for Sears (then known as Sears Roebuck) and AFAIK
    they INVENTED the concept of the "extended Warantee" for extra money.

    I know thats the first place I ever heard one mentioned.

    Though we were not asked to sign any "disclosure agreement" we (all
    employees) were told NOT to discuss the workings of the "extended warantee"
    outside the workplace.

    Sears saw it as a "money bucket" and offered "Push Money" to all salesmen on
    the floor. The "Push money" was as high as 10% of the cost of the warantee.
    Sears, and other companies that followed saw the sale of this warantee as a
    true "Cash Cow" and they have been getting "Money for Nuthin'" and the chicks
    for free, ever since.

    Any time a retailer pushes THAT hard to sell a non tangible service, you can
    be sure its a "High Profit" "Low Loss" deal. In other words, designed to be
    good for the seller, not for the buyer.

    The retailer knows that only 10% of buyers are going to try to use the
    warantee, and only 10% of those are going to really get something out of it.
    Larry, Jan 20, 2005
  6. Sheldon

    AK Guest

    Insurance companies make BIG bucks on extended warranties, that
    should give you a clue as to whether it is worth buying.
    Interestingly the camera shop I buy from in the UK gives a free 3
    year warranty on the body and 7 years on the lenses, and no they have
    not hidden the cost in the price as they tend to be cheaper than most
    other stores in the UK
    AK, Jan 20, 2005
  7. Sheldon

    Roger Guest

    CJ did a very nice and thorough explanation of extended warranties.
    I'm not going to recommend for or against the extended warranty, but
    just state my approach.

    Like going to a Casino you are playing the odds and they are not in
    your favor, BUT there are times.

    I rarely purchase extended warranties, but I am hard on equipment.
    The only piece of equipment I baby is the Debonair. I have to as my
    life depends on it in ways most don't think about. Those who think
    hitting a deer with a car is exciting should try it after dark, when
    landing an airplane.

    With cameras, I just take my chances and I give them a real work out.
    My D-70 was back for warranty work twice in the first 6 months. It's
    doing find now. The camera shop recently sent me a flyer for Nikon's
    extended warranty at half price. If they can do that it must be a
    money maker. No I didn't take them up on it.

    But, back to extended warranties. I seldom get them.
    One poster mentioned Sears and their warranties. I'm probably about
    the only customer they don't want to purchase one.

    So far they replaced the engine on a yardvac that cost more than I
    paid for the whole thing and they did it within a month of me
    purchasing it. (it was one of those some one had purchased and brought
    back as it wasn't what they wanted <G> I think they probably forgot
    to put the oil in)

    I have one of the big rototillers. I hooked a tree root which not only
    trashed the tiller part (it bent the tines which hooked other things
    and the domino effect took over) it wiped out the transmission which
    is basically the frame on which every thing else mounts. The only
    things left were the engine, tires and handles.

    In both instances just the one repair was more than the cost of the
    item plus the warranty and both have been repaired multiple times.

    HOWEVER, I make it a practice not to purchase extended warranties on
    any thing else unless it looks to be in my advantage and that is not
    often.. I do evaluate the possibilities and what it might cost me
    though and that is why the two items were on one.

    I purchase everything on a CC and pay it off at the end of the month.
    That gives me some extra insurance if the item turns out to be a
    lemon. However, CCs that double your warranty, may or may not really
    offer a useful service.

    Remember at CC interest rates things can get expensive in a hurry.

    Roger Halstead (K8RI & ARRL life member)
    (N833R, S# CD-2 Worlds oldest Debonair)
    Roger, Jan 20, 2005
  8. Sheldon

    MrB Guest

    I agree wholeheartedly! The clerk in the store often receives a commission
    for selling extended warrantees. The stores wouldn't push these things so
    hard if the contract weren't weighted in their favor. I buy a lot of "stuff"
    and always forgo the extensions and mostly without regret.
    MrB, Jan 21, 2005
  9. Sheldon

    Pete C Guest

    I always passed up on extended warranties and never had any regret
    until a few years ago my CP950 suddenly stopped focusing and I had
    to pay Nikon $160 to fix it rather than lose a $1000 camera that was
    still quite new.
    I subsequently paid Circuit City $60 to "insure" my Tivo and when it
    could no longer "phone home", CC replaced it with no hassle. It would
    have been out of warranty and probably lightening or a power surge was
    responsible but their policy is fix or replace if under contract.
    I bought a warranty on the CP5700 in the hope that I would never need
    it but I prefered to not send another check to Nikon although I would
    welcome an excuse to have to replace it with a D70.
    Pete C
    Pete C, Jan 29, 2005
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