[net.consumers] Are service contracts worth getting?

ribl@mtx5b.UUCP (R Blechman) (05/10/85)

As I am currently moving to a new home, I find that every appliance
dealer likes to suggest purchasing their service contracts.
(i.e. contracts that will extend the warranty of a given product).

For instance...  At Brick Church Appliance in New Jersey...
$199 - for a five year warranty for a washer/dryer pair.
$69 - for a ten year warranty for refrigerators (compressor only).

My questions to those with appliances and/or those who've purchased 
(or considered purchasing) service contracts:

1) What sort of mean time to repair do these items experience?
2) When they *do* break, is the cost more than the price of the contract?
3) When such things break, are the things that need repair usually easily
   repairable by oneself (one who has limited mechanical know-how)
4) Do these things usually expire before typical problems set in?
5) How agreeable are the dealers in honoring their own contracts?

Something tells me that in 90% of the cases they aren't worth it, but
I'd really like to hear some other opinions on some or all of these
questions...
thanks,
ron blechman

jayt@ssc-vax.UUCP (Jay T McCanta) (05/10/85)

> I find that every appliance
> dealer likes to suggest purchasing their service contracts.
> (i.e. contracts that will extend the warranty of a given product).
> 


I bought a JVC 4-head VCR last week and while looking t VCRs, the
sales people gave such terrible stories about how much it costs to
get a VCR clened, etc., and I should buy their service agreement.
I know that for major appliances (washers, refig, dishwasher, et. al.)
that the agreement is not worth the cost.  The appliances rarely
break down during the agreement period (they wait 24 hours after it
has expired :-)), but what about a VCR?  Is it really worth it
to have a maintenance agreement?  I have about twenty days to by it
if I choose to.  Any suggestions?

-------------------------------------------------------------------
     Mine is not to question why ...
            mine is to make the payments on time.
-------------------------------------------------------------------
Jay T. McCanta  
Boeing Aerospace     These ideas are mine and I claim them.
Kent, Wa.            My employer may not want to share in claiming.

{uw-beaver|adiron|cesonix|argus|purdue}!ssc-vax!jayt

woods@hao.UUCP (Greg Woods) (05/13/85)

  I think service contracts are in the same category as auto and homeowner's
casualty insurance policies. They are a ripoff unless something bad happens,
in which case you will profit (and pay higher premiums, but I don't know if
they can do that with a service contract!). The best analogy I can think
of is a lottery ticket: the expected value of the ticket is certainly less
than it costs to buy one (otherwise the state would lose money selling
them), but some of them *are* million-dollar winners.
  My policy on these things is: unless the consequences of disaster are more
than I can afford to replace myself (like a fire in my home), I do not go
for insurance or service contracts. Since I could (in the worst case) afford
a $200 or so repair bill for my washer, I wouldn't pay for a service contract,
preferring instead to play the odds (which are against a service contract
paying off. If they weren't, the dealers couldn't afford to sell them).
  I do have homeowner's insurance (since a disaster *could* wipe me out
without the insurance), and car insurance (but only because it is required
by law), but I refrain from getting applicance service contracts. I also
don't purchase lottery tickets. Why pay voluntary taxes?

If you can afford the consequences of disaster, don't buy insurance!

--Greg

P.S. Expected value = (sum over all possible outcomes) value of outcome *
     probablilty of that outcome. In the case of a lottery ticket, that
     would be the sum over all possible prizes (including losing!) of
     value of prize * odds of winning that prize. Since the vast majority
     of the tickets are losers (value of prize=0) it turns out that this
     sum will be less than the dollar cost of the ticket, which is where
     the state makes money.
-- 
{ucbvax!hplabs | allegra!nbires | decvax!noao | harpo!seismo | ihnp4!noao}
       		        !hao!woods

CSNET: woods@NCAR  ARPA: woods%ncar@CSNET-RELAY
   
     "...I may not be right but I've never been wrong
      It seldom turns out the way it does in the song..."

dave@lsuc.UUCP (David Sherman) (05/17/85)

In article <1539@hao.UUCP> woods@hao.UUCP (Greg Woods) writes:
||
||  My policy on these things is: unless the consequences of disaster are more
||than I can afford to replace myself (like a fire in my home), I do not go
||for insurance or service contracts. Since I could (in the worst case) afford
||a $200 or so repair bill for my washer, I wouldn't pay for a service contract,
||preferring instead to play the odds (which are against a service contract
||paying off. If they weren't, the dealers couldn't afford to sell them).

We can afford the cost of service, yet we have extended service
contracts on all our appliances. Why? There are two factors which
Greg's arithmetic doesn't take into account:
	(a) you'll get repairs you otherwise wouldn't, and
	(b) you can be less careful about how you treat the appliance

For an example of (a), consider our oven. I did something rather
dumb* which set the inside of the oven on fire. After cleaning it
out and putting it on self-clean, the inside of the oven remained
totally streaked with black. If it had been our own nickel, we'd have
left it that way; since it was on extended warranty, we called in
CGE** and they replaced the inside of the oven(!). That's just one example;
with a service contract, you're much less hesitant about calling for
service when anything at all is wrong, and consequently your appliances
will be in better shape.

As for (b), we certainly don't go deliberately damaging the appliances,
but we also don't worry about whether we're doing everything right
to take care of them. We know that if anything goes wrong, CGE will
come in and fix it. Is this irresponsible? I don't think so. It's
factored in to the price of the service contract ($140/year for 5
appliances).

Dave Sherman
-----------------
*Dumb enough that I won't post the details. If you're interested,
ask via mail.
**Canadian General Electric
-- 
{  ihnp4!utzoo  pesnta  utcs  hcr  decvax!utcsri  }  !lsuc!dave

woods@hao.UUCP (Greg Woods) (05/20/85)

> 	(a) you'll get repairs you otherwise wouldn't, and

  Not always true. Many local repair services are highly reluctant to perform
warranty work, since they have to get reimbursed through the factory. They will
do it of course if required, but it's often a real hassle to get them to agree
that a repair is really needed. It sounds like you found a good dealer. Lucky
you. I sure wouldn't count on that kind of response.

> 	(b) you can be less careful about how you treat the appliance

  With any decently-built appliance, not that much care is required. I'm
willing to bet on my ability to not do anything stupid, and I'm willing
to pay the consequences if I do. So far, I've saved a lot of money by
*not* buying service contracts. GE wanted nearly $200 for my washer and
dryer for a year. That is 15% of the original purchase price. I think
one average repair bill would be less than that. I'd rather take the risk.
I still claim the odds are in my favor. I do not deny that the contract
pays off in the short run if something goes wrong. I merely maintain that
over the course of a lifetime you will be better off *not* letting them
rip you off for what amounts to an insurance policy, which is *always*
rigged to make money for the seller.

--Greg
-- 
{ucbvax!hplabs | allegra!nbires | decvax!noao | harpo!seismo | ihnp4!noao}
       		        !hao!woods

CSNET: woods@NCAR  ARPA: woods%ncar@CSNET-RELAY
   
     "...I may not be right but I've never been wrong
      It seldom turns out the way it does in the song..."

essachs@ihuxl.UUCP (Ed Sachs) (05/20/85)

Another thing to consider is that service contracts usually
include regular house calls for preventive maintenance, which
can often prevent the appliance from failing at an inconvenient
time.  My general rule of thumb is that if the service contract
does not cost more than two service calls, get it (you'll use
at least one for the preventive maintenance).
-- 
				Ed Sachs
				AT&T Bell Laboratories
				Naperville, IL
				ihnp4!ihuxl!essachs