If you've shopped for a computer lately, you've probably heardthe hard sell. "Whatever you do," the sales guy says, "sign up for ourservice plan."
Then you do the math. Most plans run between $249 and $299for two or three years of service. For some laptops, that nearlydoubles the cost, and for a $2200 machine, you're adding more than 10percent. The big question is: Is it worth it?
Consumers and computer experts have different takes on thematter. So the quick answer is: It depends. And part of that "depends"is your situation: how much you'll lose if you're computerless for awhile, and how good your particular service plan really is.
The other part is what your manufacturer's warranty coversexactly, and whether you need anything else.
It's not easy to hem and haw when it comes to service plansbecause some vendors insist that you buy the service plan on the dayyou buy the computer in order to be eligible.
But they usually have a return policy on the plan, too. So, ifyou're forced to make a decision fast, you do have that in the 14-dayor 30-day loophole.
Before the return window runs out, though, it pays toscrutinize the fine print of your plan and make an informed decision.
What service plans are
"It's like any insurance policy," says Doug Jones, a professorof computer science at the University of Iowa. "The insurer wants tomake money selling the insurance, and you can bet that they do on that$249 plan.
"On the other hand, you want the protection. If your machinebreaks, you're going to be out far more, not just in the cost ofreplacement, but in the inconvenience and hassle," Jones says.He explains the math behind the plan."Assuming that the service plan is offered on a not-for-profitbasis, which is very unlikely, and assuming that they simply give you anew machine instead of trying to fix anything that breaks, which is notuncommon," Jones says, "you can figure that a service plan costing $250on a machine costing $1,000 is a prediction that one in four of thosemachines will require replacement."The numbers are actually skewed toward computer vendors, whichis no surprise."My understanding is that the normal failure rate for consumerelectronics is closer to one in six," Jones says.Consider your productSome products tend to break down more often, so consider that beforeyou sign up."Large-screen, flat-panel monitors seem to have unusually highfailure rates, with some models pushing 40 percent failures in thefirst year," Jones says, "while hard drives are getting very good, withfailure rates down near 2 percent for the drives in desktops."Of course, most failures occur during the normal warrantyperiod, and you don't need to buy the service plan to have those onescovered.
"The major downside to service plans is that they don't covernegligence," Jones says."When my daughter spilled a whole glass of Coke into herlaptop, the service plan didn't cover it," he says."At the time of the accident, her attention was elsewhere; shedidn't see the spill until brown liquid was flowing out the CD slot inthe side of her computer. Strangely, when she took it in for serviceunder her service contract, they said the insides were full of evidenceof the spill and that her service contract didn't cover it."Generally, if you spill a double latte or drop your laptop onthe kitchen floor, no service plan will help you.But for other problems, a plan can step in.Do you need a plan?Service plans "can be very sensible, depending on how muchequipment you have and how much maintenance they require," says DanHeilman, editor of Computer User magazine in Minneapolis.That's especially true if you're buyingfor a small business."If your company has got morethan a couple of networked PCs, but isn't big enough to employ afull-time IT person, they can be a good way to get the security and theexpertise without paying an extra salary."But forindividual consumers, it's a different story. Heilman would tell afriend not to shell out $249 to Best Buy or Dell for three years ofservice.
"I wouldn't, because the manufacturer'swarranty will cover you if you've bought a lemon. And the way pricepoints are dropping, before too long $249 will get you a new machine."The exception is the small business with many machines."Again, I think it depends on how muchhardware you're talking about. For one laptop, I wouldn't bother, butif you have a 50-person sales force that's always traveling and beatingup their equipment on the road, then it might be a good idea." When you definitely don't need a planBefore you sign anything, lookat the dollar value of what you're buying. Some electronics storesoperate the way some jewelry counters do, selling insurance at a costthat doesn't jive with the product.If the cost of your desktop has decreasedby 20 percent this year, or if your digital camera is half the price itwas last year then you don't need a plan.Even the sales guys will admit that, ifyou push hard and ask directly.And you may want to look into thereputation of the electronics store or computer vendor before you signup for their plan. Consumer Reports has detailed informationon where to buy a computer, and it's worth checking out before you makethe double investment of a plan.Saved by the planSome consumers swear by theirservice plan.
"I paid the extra money for the two-yearservice plan when I bought my Dell Latitude laptop, and it paid off acouple months ago when my USB port suddenly stopped working," saysMaggie McKnight, a graduate student in Iowa City, Iowa. "Within 24 hours of my calling Dell, a guycame to my house, took my laptop apart on my desk, replaced the USBport, and cleaned up after himself."There was no additional charge because Ihad the service plan."Erica Bleeg of Portland, Maine, aphotographer and writer, has also benefited from several years of Dellservice, and her carefully saved receipts show that she actually cameout ahead.And yes, she'd pay for it again.The battery factorIf you're looking at a laptopservice plan, computer junkies say there's a key question to ask. Thatis: "Are new batteries covered under the plan?"At Best Buy, for instance, replacementbatteries are covered. So if you expect to buy a new $100 battery oncea year, the three-year, $299 deal may really pay for itself.Of course, if you plan to use your laptoplightly, that thinking doesn't work. But because many laptop-repairproblems mean the whole machine needs to go, it probably makes sense toconsider a service plan if you're purchasing a pricey laptop and youexpect to depend on it.
What to look for in a plan"Get all the facts you can,"says Heilman. "At what point does the plan provider replace faultyequipment? How far beyond the manufacturer's warranty do they go?"He recommends other questions too. "Arethere makes and models of computers they won't cover? Do they dorepairs on site or at least have a local drop-off spot, or do you haveto mail them your equipment for repair?"Finally, Heilman says, keep a cool attitude, and evaluate whether thehot-talking salesman really has your best interests at heart. It alldepends on what you're using your machine for, what kind of backup youhave, and what you stand to lose if your new PC goes kaput."Don't let anyone tell you that youabsolutely need one, because every situation is unique," Heilman says.That's true for business users too."Even if you have a good-sized fleet ofcomputers, maybe there's someone on your staff who can do routinerepairs and maintenance."But you might weigh the cost of one ofthese plans against the cost of having your whole system crash and staydown for a week or more, and find that you'll sleep better with thatinsurance in place."So a service plan is like any insurance.Great for the nervous;potentially helpful in a crisis; and though the sales brochures neversay so, not a smart financial move for everyone, in every situation.Bankrate.comis the Web's leading aggregator of information on financial productsincluding mortgages, credit cards, new and used automobile loans, moneymarket accounts, certificates of deposit, checking and ATM fees, homeequity loans and online banking fees. Visit Bankrate.comto get the tools and information that can help you make the bestfinancial decisions.
Source: Money & Work
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