Friday Finance Findings For June 20th – Extended Warranty Edition

Normally you hear about those extended warranties on electronics, and the common consensus is that they are a waste of money. I tend to agree, but when it came to our Xbox 360, it was the best investment we could have made. We picked up our Xbox in December of 2006, and back then Microsoft only offered a 1 year warranty. This is usually fine, but there were rumors around the internet that people were seeing problems. Once your warranty was up, it cost around $100 to send it to Microsoft to have it repaired, and you’d be without your unit for typically 4-6 weeks. That seemed a bit steep considering the unit itself was only $379.

So, we were presented with a 2-year replacement plan for about $53. It basically had two good features: you could simply take it back to Best Buy and immediately get a replacement, and it extended beyond the standard warranty. Not too bad, so we figured that even if if broke after the first year, since it would have otherwise cost around $100 to have them repair it, we’re basically cutting our repair cost in half.

The saga begins. Microsoft shortly after acknowledged the high failure rate, so they decided to extend the warranty to 3 years for all units. At first, that seems to make our extended warranty purchase look like a bit of a waste. But, there is good news. Our first unit broke in January of 2007, just over a year from the initial purchase. Thanks to the protection plan, we were able to simply get a no-hassle exchange. And just last weekend, we had the dreaded problem again. Luckily, we still have about 6 months left on our protection plan, so it was off to Best Buy for a replacement.

Well, this is where things really begin to pay off. Since the bundle we purchased back in 2006 was no longer something they sold (it had something to do with a free game that was included that we never played and returned it with our first exchange), they offered an exchange for a comparable product. Well, for some reason, the lady that was helping me said the comparable product was the Xbox 360 Elite, which sells for around $450. So, she gave me a store credit for $480 to account for sales tax. So not only did we get a new Xbox, but we essentially got a free upgrade to a better model that costs close to $100 more.

To make things even better, we now get a new 3-year warranty from Microsoft on this new unit, extending our coverage to 2011. I doubt we’ll have to use it, since this newer build has an updated motherboard and a CPU with smaller size and power consumption, but it is nice to know we have a lot of life left in this thing. So, spending $53 to get two free replacements and a free upgrade has turned out to be quite nice. I still don’t typically recommend these types of protection plans, but in this case, it really did pay for itself and then some.

Author: Jeremy Vohwinkle

My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.

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