Quote:
Originally posted by Jiggy_12@Oct 7 2005, 07:41 AM
Well, none of your points were wrong. All 4 things you listed were completely true.
Now, I should have been specific. I don't sell electronics. I sell major home appliances. IMO, a TV has less of a chance of breaking down then say, a fridge.
If the compressor in your fridge malfunctions, not only is it $300 to replace the part, but an additional $150 + for labour. The extended warranty I would have tried to sell you, would have been $140. Which covers all parts and labour for 5 years.
All controls have gone digital, and for ths most part, brands don't build their appliances to last much longer than 10 years. You could have bought an appliance 20 years ago and have counted on it lasting till today. Not anymore.
I hear about service nightmares all the time. 90% of the time the extended warranty will not be used. The customer wasted $140. But those that use it are sure thankful they bought it.
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Okay, so let's do a little math.
let's say the average repair bill on a home appliance is 50% of the cost of a new one (not unreasonable in my opinion).
If 90% of the people who buy them don't use them, then my expected cost would be 10%(chance of needing it) * 50% (cost or reapir) = 5%.
So for that $140 to be a reasonable deal, that had better be the price for of the warranty for a $2800 appliance.
And if you really want to do some specific math, if I'm banking on my compressor going and I've got ~ 10% chance of using it then really what I'm looking at is
($300 + $150)*10% = $45
So if I'm buying the extended warranty for a job that will only cost $450, then that warranty had better only cost me $45.
Plain and simple, companies wouldn't sell these things if they didn't make money off of them. Sure it's a gamble, it's just like going to the casino. There's alwasy the possibility that your house will get strck by lightning and your $140 warranty will save you $5000, but you're probably just as well off going and putting that $140 on the roulette table. If these things didnt' make money for the store they woudln't sell them, so if they're making money off of it, then the consumer in the long run is losing.