Do you buy extended warranties? Personally, I have a mixed record.
I use Apple
A recent article from Consumer Reports makes me feel a little better about my decisions. Because of a 43% average failure rate in its laptops over the first couple of years, combined with Apple's less-than-satisfactory warranty, the article recommended purchasing Apple's extended warranty. With only an 11% failure rate with electric ranges over the first three to four years, I was better off ignoring the repeated mailings from GE reminding me that my regular warranty had expired. Still after many years as a consumer, it seems like a guessing game as to when it's favorable to purchase an extended warranty and when it's not.
For the manufacturer, this lack of information creates a selling opportunity. (And it also creates opportunities for retailers like Best Buy
Warranty Week discussed how German consumers have greater access to the reliability data of consumer products. Furthermore, in many European countries -- including Germany -- there are minimum two-year warranties for consumer products. As it turns out, the better-informed German consumer purchases fewer extended warranty contracts than the U.S. consumer. This ultimately says that if a consumer focuses on a reliable product with a sufficient warranty, there is little need to purchase an extended warranty.
Suffice it to say that without knowing the quality of the product, a consumer is more likely to purchase an extended warranty. However, it's knowing the quality of the product that creates the value of the brand. And without the brand, there would be no sales.
As an investor, I hope companies like Dell, Apple, and Sony
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