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Originally Posted by RobertPhilbeck I am curious to know why the "no frills" model comes with a shorter warranty period that the "frills" model? That is NOT something to be overlooked.
-Robert |
I'm sure there are multiple reasons, but there are simple economics involved--a five year warranty requires more money in the company's warranty budget than a one year. This is real operating cash that has to be set aside for such things. Shorten the period and it becomes cheaper. How much cheaper depends on the warranty return curve; I'd expect something like this to have a bump at the early part (infant mortality) and then a slowly rising curve over time. The area under that curve between years 2 and 5 is money saved.
Further, public companies have to account for warranty reserves as a liability, which affects their bottom line. Shedding that liability makes the books look better.
Most companies approach this in the other direction--sell you a product, then give you the option of paying more for a longer warranty. It's basically insurance money; it's down the toilet if the product never fails, and it may be money well spent if you need it. Statistically, extended warranties are *always* a bad deal because they are priced to make money (your average electronics store makes bundles on these things), but as an individual the statistics mean nothing.
Like all insurance, it boils down to personal risk assessment and pocket depth. If you have the cash flow to withstand an unlikely but large payout, in the long run you're better off not paying for the coverage. If you are in a position where you're out of business if you need to cough up a pile of money all of a sudden, you are better off paying for the coverage (particularly since, in this case, you can finance it, which makes it cost even more but spreads the pain out over time.)
I wouldn't read too much into warranty length with regards to product quality, particularly in this price range and marketplace.