I have a love / hate relationship with extended warranties. By and large, I think they are a waste of money, though on occasion, they have paid for themselves several times over.After I graduated from Brigham Young University, I took a job at an electronics retail store. I was looking for a job in TV, but those were hard to come by and I knew it may take a while. Add the fact my wife was several month pregnant, and the urgency to get a job was pretty high.
The place I worked is no longer in business--and it is no wonder why. We were straight commission sales--plus we had to empty the trash, mop the floors and clean the bathrooms in our suits as a "perk" of working there. (Again, we were straight commission, so you can imagine how much commission I got from scrubbing toilets)
One thing they really pushed was the extended warranties. In fact, they would track the percentage of your sales dollars and the minimum expectation was that 10% of your sales came from the extended warranties. And if you think about it, why not? After all, you are getting people to pay for something they may never use. It's almost pure profit.
Again, think about the term: it is an extended warranty--meaning it only kicks in after the manufacturer's warranty expiries.
Here is a true story: I sold a customer a cell phone and as well as the two year extended warranty. A few weeks later, he came back with the phone, telling me it stopped working, but he had bought the extended warranty. I had to explain to him that for the first year, he had to contact the manufacturer--but since I am such a nice guy, I helped him find the number and we called from the store. The result? He was expected to send the phone back to the manufacturer in the original packaging and he would get it back in 6 to 8 weeks. If he didn't have the packaging, there would be a fee. I honestly thought the customer was going to deck me.
After that, I had a hard time selling the extended warranty because I didn't believe in it. I quit the job soon after because I got my first TV job.
But the extended warranty stories don't end there. My wife and I got a car and were "talked into" getting some sort of paint coating protection. A couple of years after we had the car, we noticed some issues with the paint, so I called the number about the warranty. They said they would be "happy" to help us. We would just need to drop it off to an authorized repair shop--and that it could take up to a week to get it done. Where was the nearest "authorized" shop? 3 hours away.
But here comes the "love" part of the story. When we bought our last van, my wife was a hard nose. She is quite the shopper and bargainer. We actually walked out on the salesman because my wife wasn't happy with the offer on the trade in. He called us back a few days later with a better offer, and included an extended warranty at no extra cost--and it was for 8 years or 80,000 miles.
Just this week, with our van at 78,000 miles and less than 4 months until it turns eight, we took it in to have it looked at. The call from the service man said that we needed a whole new rack and pinion system as well as a number of other things. He told me what all of these were over the phone. I listened politely. After he was done, I said, "Well, it sounds like you have some work to do. Go ahead and get started."
He was all excited and started to give me a quote when I nicely interrupted him. "We have the extended warranty."
There was silence on the other end of the phone for a moment. Then he said, "You do?"
"Yes."
"Let me call you back," he responded.
15 minutes go by. The phone rings again. It is the service guy. "After talking it over, I'm not so sure all those things need to be replaced."
"I have a list here of what you told me, and I don't think you would want one of your customers riding around in an unsafe van, would you?" I answered.
"Well, no. But there is no way we could get all that done today," he says.
"That's ok--tomorrow will be fine for me. Thanks for calling and letting me know about those problems. We'll see you tomorrow."
