Service plans... am I brainwashed?

Question

I work at Best buy, and I also listen to Clark Howard. For those of you who know who he is, he is a financial expert, and strongly dislikes all service plans that everyone pushes. While I admit that I am forced to ask anyone and everyone if they want it with their camera or camcorder, I honestly think we have a good service plan. I don't like them on antrhing else, even on other products in our store, but thats why I am asking if you think it is a good service plan or am I brainwashed..
It covers it for 4 years ((ex $1500 camera =$140 service plan), replaces battery, covers cleanings, parts and labor, but I like it because it covers any accidents or abuse that happens to it. 4 years full coverage on a big investment doesn't seem like a ripoff to me. Is it? Or am I right?

Answer 1

DONT GIVE IN, ITS A CONSPIRICY, FIGHT THE RESISTANCE!!

Answer 2

Service plans are huge money makers for companies such as Best Buy. From an actuarial standpoint, the premiums are way too high: that is, if you look at the total premiums that 10,000 customers pay compared to the amount the company pays out on claims, the company pockets a lot of money. If you look at individual customers, the company loses money on some customers and wins on most of the others, but makes a profit overall.
For the customer however, it's a gamble: if the product breaks during the warranty period, the customer has to find his way out to a repair center, or foot the bill for shipping the product. Extended warrantees make it easier for the customer to get service. If the product breaks after the manufacturer's warranty ends, he's out of luck. With a lot of products however, by the time the product breaks, it isn't worth much more than the price of the extended coverage anyways, and if you really want an exact replacement of the product, you might be able to buy it for less.
I usually don't take up these offers on cheaper products. A $150 camera will be worth a box of cereal in 4 years time, so why bother paying $30 for a 4 year plan? If it breaks in 18 months, I've lost the gamble.
On the other hand, $140 for a $1500 product isn't that bad, even if it's only worth $50 to Best Buy. The $1500 camera is probably built better, and the odds of it breaking are lower. But if it breaks in 18 months time, I'm out of pocket for some fairly serious money, so I'd think seriously getting the coverage.

Answer 3

You're brainwashed alright.

All the extended service plans are is an overpriced insurance scam. It's a gamble that the consumer takes against the odds of a problem. The cost of the policy is set up so that the store is, on average, going to make a profit. Usually it's not a small one.

Unless you're someone who regularly trashes their things, you're giving money away, simply based on the probabilities of the situation. Now, like any other insurance policy, it may give you peace of mind and that may make it worthwhile to you. But for smaller items, it's usually just a lose-lose situation.

Answer 4

Howard Clark isn't the only one that doesn't like them. Dave Ramsey (another financial expert and radio host) strongly dislikes them also.

I don't think they are a good deal. Most people, including myself, forget what it covers or it is too inconvenient to go back and get the batteries where you bought the item, etc.

Another poster took my words right out of my mouth; most service plans make the company big, big, big money. Just like selling the store credit card.

Answer 5

I had an HP camera go bad on me. I don't usually buy extended warranties but I'm glad I did that time. My problem is salespeople (not at Best Buy) asking me repeatedly if I want the extended warranty, even after I say no thanks. Once I had to cut her off in mid-sentence & say "look, are you going to sell it to me or not?" Your plan sounds good.