dougdrake Posted December 22, 2004 Share Posted December 22, 2004 A recent article in Business Week, I believe, confirms what we all suspected. Although most companies don't talk about it in their financial statements, they deduced that Circuit City gets 100% of its operating profits (you accountants out there can tell us what "operating profits" are) from extended warranties and service plans, and Best Buy gets around 42% of its operating profits from them. The article suggested that some electronics stores are not in the business of selling electronics, but rather simply use them as a vehicle to make money selling service contracts, much as movie theaters aren't in the movie business as much as they are in the food business. Quote Link to comment Share on other sites More sharing options...
Tom Adams Posted December 22, 2004 Share Posted December 22, 2004 Very interesting Doug. Thanks for that info. It's no damn wonder they push those service plans so hard. Let's face it though, those service plans are nothing more than insurance. And is there money to be made in insurance?? The answer lies in looking at the name at the top of the tallest/biggest buildings in major cities. BTW, I asked the CPA wife what the term "operating profits" mean. Ho boy....I should know better. I got an explanation and when she finished I had to ask, "So what does that really mean?" Her reply was, "That's probably a boat load of money that they can play around with." Tom Quote Link to comment Share on other sites More sharing options...
dodger Posted December 22, 2004 Share Posted December 22, 2004 When you buy at Circuit City, you are almost punched into a service plan. No matter the Company, most people do not use the service plans paid for. But, there usually is a difference between an Extended Warranty on a smaller item and a Service Plan. Service Plans are usually for scheduled maintenance as on a sewing machine for example. It covers the "yearly" check-up and service and possible break down. Usually sold on things where parts will be available for a while. Extended Warranties for the most part take the language of the Manufacturer's Warranty which may be 1 year and extend it to 2 years. Usually for items not worth repairing or where model changes may be frequent. If item breaks and it's not due to abuse, it's replaced with the current model. My wife had a Service Plan on her Sears Sewing Machine. She would pay about $40.00 per year and never bother to take the machine in for its check up and service. 100 % profit for Sears. The only point where I have seen Extended Warranties worth it personally, are on Plasma TVs and Vehicles that you buy and plan on keeping for at least the 7 years, 70,000 miles. For Auto Extended Warranties, I have seen the price come down quite a bit IF when the Finance person offers it and you state I will take it for $XX in CASH, and pull the money out. Let them give a price and offer 2/3. They usually have taken it. dodger Quote Link to comment Share on other sites More sharing options...
kenratboy Posted December 22, 2004 Share Posted December 22, 2004 At Best Buy, the service plan on projection TV's cover REPLACEMENT LAMPS, which could (if you watch a lot of TV, WILL) easily pay for itself in 4 years. Quote Link to comment Share on other sites More sharing options...
nicholtl Posted December 22, 2004 Share Posted December 22, 2004 Personally, I think extended service plans are a neccessity. I've had so many electronics break on me in the past that now, anytime I buy something over $300, I'll buy an extended service plan as well. Just to cover my a$$. I've had to repair a dvd player, my 51-inch TV, and my 45TX already. Quote Link to comment Share on other sites More sharing options...
dodger Posted December 22, 2004 Share Posted December 22, 2004 I'll go with Kenratboy with his recommendation and Nicholtl has a very valid point. Buy it and use it. dodger Quote Link to comment Share on other sites More sharing options...
kenratboy Posted December 23, 2004 Share Posted December 23, 2004 ---------------- On 12/22/2004 6:35:42 PM dodger wrote: I'll go with Kenratboy with his recommendation and Nicholtl has a very valid point. Buy it and use it. dodger ---------------- It's worth it on some things - and not at all on others. The other thing is - when they setup a service plan (ANYTHING - electronics, cars, tools, etc.) they are looking at the average. If your use will be above, or WELL above average, that is also another time to think about it for anything. If I am buying a DVD player and will use it 12 hours a day, 7 days a week, I would go for it, as it will probably break or at least need a good few cleanings. If I have a truck and will be towing a lot of heavy stuff, yeah, an extended warranty might be a VERY smart idea. Quote Link to comment Share on other sites More sharing options...
dodger Posted December 23, 2004 Share Posted December 23, 2004 ---------------- On 12/23/2004 12:05:30 AM kenratboy wrote: ---------------- On 12/22/2004 6:35:42 PM dodger wrote: I'll go with Kenratboy with his recommendation and Nicholtl has a very valid point. Buy it and use it. dodger ---------------- It's worth it on some things - and not at all on others. The other thing is - when they setup a service plan (ANYTHING - electronics, cars, tools, etc.) they are looking at the average. If your use will be above, or WELL above average, that is also another time to think about it for anything. If I am buying a DVD player and will use it 12 hours a day, 7 days a week, I would go for it, as it will probably break or at least need a good few cleanings. If I have a truck and will be towing a lot of heavy stuff, yeah, an extended warranty might be a VERY smart idea. ---------------- Note: I believe Nicholtl is describing an Extended Warranty. As in my earlier post, there is a difference between Extended Warranty and an Extended, or plain, Service Plan. If it is the Service Plan, be sure to use it. dodger Quote Link to comment Share on other sites More sharing options...
WMcD Posted December 23, 2004 Share Posted December 23, 2004 I would not buy them because I've had good luck with components. The other part is that I'm sometimes buying cheap stuff (the $89 DVD player from Sears) and the plan is relatively expensive compared to a replacement. That might not be true of high end stuff. I can see how they are good for budgeting. I worked at a library. The somewhat gray haired lady boss was as smart as a fox. (What a gem.) When it came to copiers, she'd solicit bids for the machines and a five year service plan, whether it was included or extra. That put all bidders on an even basis. "What is the bottom line?" For good or bad, the ones purchased were a bit cranky and the repair guy visited once a week. But generally they were kept working. The service guy was sweet on one of the other (very cute) employees, and that may have had something to do with his visits. A few years later I was in another employ. One of the younger bosses and I went to CompUSA for four PCs. He bought the extended service plan. I thought it was a waste but held my tongue. After the manufacturer's warranty ran out, one of the broke down. The older boss was not happy. You could see the thought balloon over his head: Why did you buy a piece of junk which is costing me money to keep running? When he was told a repair man would be coming by (it was on-site) and there was an extended warranty already paid for, he smiled. The Tappet Brothers (Tom and Ray on NPR) had counselled that long term service agreements can work well because they get included in the financing. I suppose that reflects that some car loans can be cheaper than what you pay on a credit card, where an engine rebuild might go. I don't know about the accounting thing. It sounds like the seller is not just marking up someone else's product. Rather it goes in their till, in full, and service is provided by a subsidiary . . . or they pay the service provider in two or three years as work is required. Best, Gil Quote Link to comment Share on other sites More sharing options...
Cal Blacksmith Posted December 23, 2004 Share Posted December 23, 2004 It is rare that I buy any extended warranty or service plan. I put about 50,000 miles a year on a car so the manufacturers warranty is over pretty quick. For that matter, I dont buy new cars, I use them up too fast. I do buy coverage for the tires when I replace them though, I have had 3 nearly new tires damaged by road hazards and they were replaced free under the coverage. For electronics, I never buy extended warranties, my general experience is that if it lasts the first year, which is covered under the manufacturers warranty, then it will last for as long as I keep the item. My average is pretty good and the $ amount that it would have cost for the extensions far exceeds the amount I spent to replace items that failed after the warranty. Quote Link to comment Share on other sites More sharing options...
Moderators Travis In Austin Posted December 23, 2004 Moderators Share Posted December 23, 2004 I just bought my wife a SONY 400 DVD/CD changer from BB and I went ahead and got the extended 4 year warranty for $50.00 bucks. They had mailed me a 10% off preferred customer coupon which pretty much covers the cost of the warranty. After she opens it I will tape the receipt and service contract on the bottom of the unit. I have found that after two or three years if something goes out I can't remember if I bought the warranty or not, and if I have, that I cannot locate the receipt/contract. I have had really good luck with Sony in the past and will not need to use it, but if I do I will be able to just bring the unit it with the documents attached. My wife bought an extra Aiwa DVD progressive DVD player from Sams Club for a guest room a couple of years ago. I think it was between about $200.00. It just quit the other day, won't read any type of disk. It is out of warranty, even the extended warranty my credit card offers (don't forget about that by the way, can come in handy). If anyone lives close to Austin you are welcome to it to try and see if you can make it work, target practice or anything else you see fit. The cost to diagnose/fix the problem probably exceeds the value of the unit. Travis Quote Link to comment Share on other sites More sharing options...
dodger Posted December 23, 2004 Share Posted December 23, 2004 A good point is brought up in the post above. Proving what you have. I make it a point to remove the Manufacturer labels from the boxes and tape them inside the owner manual. That usually also includes serial number. Receipt can be stapled inside. If you buy used, try to photograph unit label with model and serial number. Contact the manufacturer for an owner and a service manual. note date, price, even a photo inside the first page. Also keep a running list of Components, TVs you own, date purchased, serial number, MRSP and price paid along with condition and description. Keep a copy along with your tax return in a bank lockbox. Keeping the Tax info in there will add that to deductible items if you can. dodger Quote Link to comment Share on other sites More sharing options...
Moderators Travis In Austin Posted December 23, 2004 Moderators Share Posted December 23, 2004 That is a very good point Dodger. You will need all of that info. for a theft or fire loss. I glad you mentioned it, I always say I am going to do it, but never seem to. I have a list for my guns, but now you have given me the perfect new years resolution to accomplish while I am watching the Rose Bowl. I am going to photograph and list every item. Travis Quote Link to comment Share on other sites More sharing options...
dodger Posted December 23, 2004 Share Posted December 23, 2004 ---------------- On 12/23/2004 3:18:36 PM dwilawyer wrote: That is a very good point Dodger. You will need all of that info. for a theft or fire loss. I glad you mentioned it, I always say I am going to do it, but never seem to. I have a list for my guns, but now you have given me the perfect new years resolution to accomplish while I am watching the Rose Bowl. I am going to photograph and list every item. Travis ---------------- Enjoy your Holidays and a late Welcome to the Forum. Keep A smile. Quote Link to comment Share on other sites More sharing options...
Griffinator Posted December 23, 2004 Share Posted December 23, 2004 ---------------- On 12/23/2004 12:05:30 AM kenratboy wrote: If I am buying a DVD player and will use it 12 hours a day, 7 days a week, I would go for it, as it will probably break or at least need a good few cleanings. ---------------- Actually, the only thing the service plan really gets you on a DVD player is the replacement when the laser gets out of alignment. Best Buy service department does nothing more than stick one of those brush discs into the machine and run it as their contracted "cleaning" when you bring it in. I know, I talked to the techs about it. Quote Link to comment Share on other sites More sharing options...
Griffinator Posted December 23, 2004 Share Posted December 23, 2004 ---------------- On 12/23/2004 3:10:03 PM dodger wrote: Receipt can be stapled inside. ---------------- Something very important to consider when you purchase from BB or CC with a service contract - photocopy the receipt. Why? They use really cheap thermal paper for their receipts. In two years, you can take it to the bank that the receipt will be completely unreadable, and if they require a receipt to prove that you bought the plan, you're SOL... Quote Link to comment Share on other sites More sharing options...
colterphoto1 Posted December 24, 2004 Share Posted December 24, 2004 IMHO, and being a great fan of Math, Extended warranties and 'service plans' are basically an insurance policy. The only reason anyone should ever own ANY type of insurance is when they cannot afford the catastrophic loss should whatever unfortuanate incident occur (loss of life, health, home, car). All these policies are carefully constructed using mathmatical models or actuarial figures, to be precise. The company knows the exact loss ratio over a large population and calculates the policy cost so as to win on average. Therefore on average, the consumer will lose. Think of it as legalized gambling where the odds are always stacked in favor of the house. Why gamble if you know that is the case. (Andy Rooney voice again) "Didja ever really notice how all the big buildings in major cities are owned by insurance companies? How come they make so much money?" It's FEAR people, fear of something BAD happening. And the salespeople take advantage of our weakness at the time of purchase. Is is really worth $39 to 'insure' a $200 DVD player when you now know that (a) the average loss is less than the $39, ( industry-wide, if something should occur, you can buy a better machine for less in a year or so. IMHO, NEVER, NEVER, NEVER, buy 'insurance' if you CAN afford the unforseen loss. Happy Holidays, Michael Quote Link to comment Share on other sites More sharing options...
mandi Posted December 24, 2004 Share Posted December 24, 2004 My only Service Plan Experience, We purchased a Fridge and about a month before the service plan was up the ice maker froze up. Well, while the repair man was in the house I asked about a bubble around the handle and he said it was probably rust. Then he honestly stated that he had never seen that before and I should have the door replaced. I then asked, well since I have this plan can I not get the whole fridge replaced, and he said "YES". I do not think he should have said yes, I wound up with a new fridge, a new 3year service plan and for some reason an 80 dollar refund. I think there was some confusion going on that day behind the cash registers of ---------. Quote Link to comment Share on other sites More sharing options...
Guest Anonymous Posted December 25, 2004 Share Posted December 25, 2004 ---------------- On 12/22/2004 6:05:28 PM kenratboy wrote: At Best Buy, the service plan on projection TV's cover REPLACEMENT LAMPS, which could (if you watch a lot of TV, WILL) easily pay for itself in 4 years. ---------------- you are very very wrong about this. read the fine lines, best buy will give ONE bulb and one chip within the first year of their service plan. Circuit City will give unlimited of both There is no arguing that these are ways to make money but remember that none of these companies are the red cross they all have to make money and stay competitive and what one does the others follow...... listen if anyone has questions about spefics about any service plan from best buy or circuit city just pm me because i know them both inside and out completly.... also there are different types of serivce plans replacement plans- guarentee replacement of a product if it is defective or breaks, circuit city gives a gift card through mail, best buy will do the same or an instore excahnge for the same thing. I just got a $180 in gift cards from best buy because I buy the stupid replacement plan and then right before it expires i call them up adn tell them the thing went to sh*t and they send me a label, i send it to them and I get a giftcard for the price of the product plus tax so its a great way for me to upgrade every couple of years with razors and telephones, i have not had to buy blades for an electric razor ever because i just get a whole new razor every year for about 15 bucks aznd it works out great for me Quote Link to comment Share on other sites More sharing options...
lovedrummin Posted December 25, 2004 Share Posted December 25, 2004 During the next month I plan to buy a Samsung DVD-HD841 at Circuit City. The store price is $200. The on-line price is $170 (a web only special). According to the website they offer a 3 year "protection plan" for $45. I'm not going to get the protection plan. Normal warranty is 12 months parts & labor. At the frequency I use a DVD player, I figure it will be at the rate of $1/day. The DVD player won't owe me anything after 12 months and anything past that 12 months is a bonus. Who knows what new goodies, bells and whistles will be on these things in another year or whenever my DVD player begins to malfunction. On a big ticket item like an HDTV, I'd probably consider it, but not on something like a DVD player. Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.