Extended Warranties: Are they worth it?

You’re at the store and the cashier asks you if you want the extended warranty and you always say no thank-you.  The decision seems logical: if parts break the manufacturer’s warranty covers it.  Also, when your equipment breaks down it might be time to upgrade anyways.

However, an interesting piece by the Harvard Business Review takes the other side.  The author, Rafi Mohammed postulates that an extended warranty gives piece of mind.  The costs and benefits of extended warranties inflate greatly with the number of machines to consider.

For example, the extended warranty on a Lenovo Thinkpad adds $269 to the $849 price tag.  That extended warranty doesn’t cover accidental damage, which will add on another $429 for four years.  Multiple that cost by 100 for an entire company and you’re running a number close to $40,000.

So is it worth it?  Well, a full service for a laptop’s motherboard and LCD screen costs on average around $900, less than the cost of the warranty.  In this scenario, that means 44% of your laptops have to totally fail in order for the extended warranty to pay for itself within a four-year period.

If your employees are constantly on the go, laptops in tow then maybe half your laptops will break within four-years.  In the end, it all comes down to: should I just buy a new one?