This weekend Tag and I went Christmas shopping for her dad. He is a science teacher by day and is basically the neighborhood handy-man on nights and weekends. He is always finding odd jobs and doing work for friends and family.
Tag bought him a power tool for his Christmas present, and when we purchased the item at check-out she was offered a three-year (I think) extended warranty for just over 10% of the purchase price of the power tool.
When it comes to electronics, extended warranties are usually a huge rip-off. Products usually come with at least a one-year manufacturer’s warranty, and then if it’s been working for a whole year and you take care of it, my experience has been that it will probably work forever. I did have a minor issue with my desktop computer a few weeks ago, but the problem was small and covered under the factory warranty.
Stupid Kevin Segue
When the PS3 first came out, my friends and I sat outside Best Buy for two full days to buy one so we could turn around and sell it on eBay for a profit. When I was at the cash register with my PS3, the cashier asked if I wanted the warranty for $100. I panicked! The guy told me it would make my PS3 more valuable on eBay and drive the price up. I was so dumb that I paid the extra $100 and then went home and put the PS3 online.
I soon found out that nobody cared about my warranty and my PS3 wasn’t selling for as much as I wanted. I did have someone bid where I would have made about $300 in profit. Instead of taking the $300, and I decided to pull the listing.
“Surely when we get closer to Christmas, people will be scrambling for a PS3 and I’ll get way more than $300.” Then Sony shipped a lot more PS3’s about two weeks later and people could easily get them for sticker price at any Best Buy. It cost me about $30 to pull the eBay listing, so I was down $30 at the time. Luckily I finally I sold the thing for $50 over what I paid.
In the end, I sat outside Best Buy for 48 hours to turn a $20 profit. What was I thinking? I encourage you to reconsider taking any financial advice from me at this time.
Warranty for Power Tools?
Unfortunately, I know about as much about power tools as I do about women’s clothing. The cashier offered the extended warranty and my initial reaction is to just say “NO!” I still think there is a huge profit margin built into those warranties and I probably made the right decision, but I wonder if power tools and electronics work the same way.
If you work with tools a lot, do you ever get extended warranties on your tools? If you aren’t handy, then I wanna hear your take on extended warranties in general.