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Old 06-07-14, 08:12 AM
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contango 
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Bikes: 2009 Specialized Rockhopper Comp Disc, 2009 Specialized Tricross Sport RIP

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Originally Posted by syncro87 View Post
Here is my take on extended warranties in general, not specific to bikes.

Some real smart people have sat down and analyzed the ins and outs of selling you such a contract.

(lots of numbers cut for brevity)

Bottom line: If they were paying more out in claims than they were taking in via premiums, they wouldn't be selling it.

If you buy an extended service agreement on something, realize up front that the only reason you're doing it is for peace of mind. You don't want to worry about it, and paying an inflated price buys you peace of mind. Logically, not much reason to buy one.

One last thing. The more complicated and expensive something is to fix, the more tempting it would be to cover your behind and get a longer warranty on something. A jet aircraft, for instance, or a CT scanner are really expensive to fix and take a high level of expertise. So you might think about it on that basis. A car is less sophisticated than a jet. A bicycle is far less sophisticated than a car or a jet. A toaster is less sophisticated than a bike. The point is, ask yourself what your loss is if something fails out of warranty. If something on my Boeing Dreamliner fails, I may not have cash to fix that $135,000 part laying around. A toaster...eh, I'll just get a new one for $35 if mine breaks.
I agree 100% with this post. On average you lose money on an extended warranty. The question you have to consider is whether you can afford to be unluckier than average.

I still remember the time I bought an ornament for 15.99 and the assistant offered me an insurance policy on it for "only 3.99". I thought she was joking - 25% of the price to replace it if I drop it? But she was serious, and when I declined she was clearly trying to scare me into relenting. She asked me what I'd do if I dropped it and broke it, and seemed unimpressed when I shrugged and said I'd chuck it in the trash and buy another one.

I tend to use the example of kitchen appliances. If you've got a cooker, fridge/freezer, chest freezer, washing machine, tumble drier, microwave oven and dishwasher, then instead of buying an extended warranty on everything just figure out how much the warranty costs and put that much in a sock (literal or metaphorical) every month. When one of your appliances needs repair or replacement, use the money in the sock to fund it. Chances are you'll come out ahead.

If you get spectacularly unlucky and everything fails at once you're badly out of pocket but the chances of that happening are miniscule.

Another consideration - if you can't afford to service the item you're buying if it does fail, ask whether you can really afford to be owning it in the first place. Also consider the standard of warranty you'd get with any new bike and whatever your local laws say about things being fit for purpose, and what the extended warranty offers over and above the standard.
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