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Extra warranties 2: An even bigger waste of money

technofile  by al fasoldt

Columns and commentaries in a life-long dance with technology

Simple gray rule

Extra warranties 2: On reconsideration, an even bigger waste of money 

By Al Fasoldt

Copyright © 1992, The Syracuse Newspapers

Are extended warranties and service policies worth paying extra for?

My answer is a loud and definite "no." If you're shopping for a new VCR or any other electronic component, you should keep in mind that these extra-cost warranties and service policies are designed with one purpose - to bring in more profits to the store.

In plain English, these "extras" are extras for the retailer, not for you.

The last time I made this recommendation, I pointed out a disturbing statistic. The electronics retail industry's own figures showed that the income that typical stores get from these extra charges often amounted to 90 to 95 percent profit. In other words, of each $100 that customers spent on extra warranties and service policies, the store might make $95 - and that's after the costs of filling out forms and keeping records are factored in.

No doubt there are exceptions. But this much is clear: If you buy a reliable component, you do not need to pay extra to keep it working.

Nor should you have to pay extra to "maintain" a component that needs little or no maintenance.

A reader mentioned a case in point at a branch of one of the largest U.S. electronics chains. After he made a deal on a CD player, the person who wrote up the sale tried to add a service policy.

The buyer turned it down, and was promptly reminded of the delicate nature of the laser used in the CD player. The laser, he was told, would need alignment at least once a year. No telling what would happen if it went out of alignment.

This buyer didn't fall for such bunk. Unless you toss your compact disc player onto the floor, the laser will work just fine without alignment.

Similar scare stories are told every day to buyers of VCRs. I have heard many of them myself. What I find most reprehensible is that of all the dozens of tales I've heard or overheard in the last few years at retail outlets, not one of the salespeople giving the pitches seemed to know much about the products being sold.

Ignorant sales help is bad enough. But if buyers are ignorant, too, the process of buying and selling retail electronics products could become a losing game for everyone - for the retailers, who will inherit the notoriety of sleaze-ball, back-lot used-car dealers, and for the buyers, who will spend more and get less.

Obviously, it's time for a change.

You can choose retail outlets more carefully, and, of course, you can refuse to discuss extra warranties or service policies when the deal is "closed" - a term that has migrated, by the way, from car dealers to retail electronics stores.

You may also be able to ask for action from government agencies. If these extra-cost warranties and service policies are basically worthless, they are being misrepresented at the stores, and that may be of interest to those whose obligation is protecting the public.

After my previous comments on these extra charges, two officials from an out-of-state investigatory agency called me and asked for more information. They said a legislative committee was considering hearings on the matter.

I declined to testify, referring them instead to a couple of experts within the retail industry. I never heard back from the agency, but I now regret that I didn't use that soap box to make a loud complaint.

If you know of any action in this area, or have had your own experiences - good or bad - with extra-cost warranties or service policies, write to me and tell me about them. It may not be a burning issue, but it's time consumers spoke out.

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