Re: Best Buy Extended Warranty
beware of best buy's extended warranties.
I am not happy with the concept of extended warranties.
They remove the incentive for the manufacturer to make a quality product that will last.
Let's look at the mechanics of that: the extended warranty is provided by a third party - Best Buy, some warranty company, etc. - and not the manufacturer. So, if something goes wrong it is the third party that pays out, and not the manufacturer. So there's no direct impact to the maker's bottom line.
In terms of reputation, when the thing breaks the consumer is more focused on getting it fixed through the extended warranty. They are proud they got the warranty, etc. But they forget they wouldn't need the warranty if the product was built that much better! The item is repaired, and there is less 'bad feeling' towards the manufacturer. (You are not 'out' anything). So, less bad feeling = less reputation damage.
Both of those things reduce the impact of a "bad" product to a manufacturer. On the other hand, there is always a pressure to produce it cheaper. The balance is shifted - it is a big temptation to cut some things out of the process, such as quality checks.
Can you see the cycle that forms? Less focus on quality means more variance in the product. More variance means that it fails more often. More failing products means more incentive for the consumer to buy an extended warranty. More extended warranties means less need to focus on the quality (for the manufacturer).
The one stop here is that the cost of extended warranties will go up - they are actually more along the lines of insurance - the cost is based on expected failure rate. As quality decreases and that rate goes up, the cost (and eventually price) of the warranty will increase.
Now, for warranties sold by the manufacturer - I'd like to think that this is double dipping...
