Warranties and Service Contracts: To Buy or Not to Buy?

Some of us are born to worry, and it is only natural that we take that trait to work with us. When we buy something at the local electronics store, we immediately worry about our decision. Will it hold up? Does it need regular maintenance? Where will I take it to get repaired?

Salespeople have been trained to turn these fears into opportunities, and it is impossible to leave the store without being offered a service plan. In fact, many stores make more profit on the service plan than they do on the equipment they are selling. Consider this: If the product were so unreliable, why would they be so anxious to bet it won’t fail by selling you an extended warranty?

We are in a golden age of electronics. Never have there been so many features packed into products that cost so little and work so well. And, since this trend has been building for many years, there’s every reason to believe it will continue. Consider this when evaluating service plans, extended warranties and maintenance contracts.

Warranties Act as Marketing Tools
With the exception of those that experience heavy mechanical wear, the majority of products that are going to fail will do so in the first 90 days. Those that don’t will fail within the first year, with an incredibly small percentage — usually well below 5 percent — failing after the first year and before the end of the product’s usable life. We’ll define that “usable life” window as seven years, as the IRS does, although it is not unusual to find 15- to 20-year-old electronic security products still in use.

This statistic, which I am sure is consistent with your own experience, shows us the true meaning of the 3-year, 5-year and lifetime warranties that we see on certain products. They are really just a marketing tool. Consider a CCTV camera purchased three years ago for $500. If it failed, would you box it up and send it back for repair, or would you upgrade it by replacing it with a camera that was smaller, more efficient and performed better, for a fraction of the price? Often, the labor to send an older product off for repair is more costly than the product itself.

Things That Break Aren’t Covered
How about components likely to fail, such as hard drives, motorized lenses, picture tubes, LCD monitor screen backlights and such? If you read the fine print, these components are generally excluded from warranties (and extended warranties) the same way tires, brakes and belts are excluded from automobile “bumper-to-bumper” warranties. They’re definitely going to fail at one point, and the easy money is betting on covering the components that will last.

While warranties have some benefit — they cover early mortality of a defective product and show you how well a manufacturer stands behind the things it makes — extended warranties usually offer no such reward to the buyer. Typically they cost between 10 and 15 percent of the equipment selling price annually, and if your equipment is failing at that rate, you should begin budgeting to replace it with products made by another manufacturer!

Again, the exclusions will prevent you from collecting on the likeliest causes of failure, such as lightning or misuse. Instead, you’re likely to be merely providing an annuity for your integrator. Consider paying for repairs on an as-needed basis, and find an integrator with a good service department and knowledgeable technicians and installers. Chances are they’ll help you select reliable products, install them properly and provide reasonable service turnaround time, negating the need for a service plan.

Maintenance Plans Worth Their Salt
Maintenance plans are a different matter. If your system is used in such a way that it will benefit from regular maintenance, such a plan can dramatically improve the performance — but not usually the lifespan — of your system. Cleaning card readers will improve accuracy, and cleaning camera housings, domes and lenses will improve image quality. Adjusting monitors, tightening camera mounts, verifying that heaters and blowers still work, and other maintenance tasks are all beneficial.

If you have the kind of integrator that will set up a schedule and regularly perform the work, by all means consider such a program. What you’re really doing is paying for labor in advance, so make sure the work is really being done. Too often, a maintenance plan is sold and forgotten by all parties until the next bill is due.

If you’re a worrier, relax. If you’ve made the right decisions, your system will more than likely hold up well. In fact, it may last so long that you wish it would fail so you can upgrade to the latest and greatest. Now there’s something to worry about!

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