April 3, 2018 Stewart Marshall

3 Reasons Why You Should Buy an Extended Warranty

  1. They’re not as expensive as you think they are
  2. They’re almost certainly cheaper in the long run
  3. You get peace of mind

I’ll explain

Should I or Shouldn’t I?

Ahh…the ever contentious subject of the extended warranty.

As ever, there are plenty of opinions, and a quick search will find many commentators. Not surprisingly, there are those who are robustly in favour and those who are just as enthusiastically against, typically considering it to be a waste of money.

So, let’s consider the purchase of a laptop around $1600. Such machines are very common in the workplace or home and they come with 12 months protection. If we use Dell as an example, extending the standard 12 month warranty to 4 years next business day on site maintenance will set you back another 25% or so of the purchase price.

So, for simple maths and to save me needing a calculator, let’s say our $1600 laptop now costs $2000.

What’s The Point?

Now, what we need to understand is the purpose of a warranty and the value that it adds.

Yes!! THE VALUE THAT IT ADDS.

If, as so often seems to be the case, you’ve simply extrapolated the numbers, worked out that 100 machines in the next 4 year cycle will cost another $40K, and immediately had a fit of the vapours, you’ve kinda missed the point somewhat.

As ever, you need to get your face away from the glass, stand back, and have a good long look at what’s going on from the correct point of view.

So, where’s the value?

Firstly, It’s Not $40K

It’s only $40K if nothing goes wrong with any of your machines in 4 years. But things will break. Life’s like that. In fact, according to the vague stats I was able to dig up, ~20% will develop a fault of some sort during their 4 year lifetime. Still, I’ll be generous and say that you had a decent run and only paid $20K in service fees and parts.

Excellent news, you’ve saved $20K over 4 years, or $100/week.

Or Have You?

Maybe, but probably not. Most likely is that you spent a fair bit more. It just wasn’t in cash.

Assuming you bought from a large reputable supplier, something all SMEs should be doing, the engineer is more likely to be familiar with the machine and he’ll likely have access to a warehouse full of spare parts that can be made available very quickly. This means he’ll be more likely to diagnose the fault correctly and more likely to have your machine back up and running with new parts as required.

However, a third party may well need to spend additional time working out what’s going on and ordering parts, assuming they’re still available.

Now, it’s hard to determine the precise value of staff productivity, but every hour spent focused on something other than their job is undoubtedly a cost, so anything you can do to have them up to speed again as soon as possible is a good thing.

$100/week for your 100 machines is beginning to sound like a bargain if it’s being spent to maximise your team’s efficiency.

Minimal Interruption

Inconveniences like this can of course be mitigated, and a spare machine or two lying around never did any harm, but we’re still well advised to have our issues remedied as quickly as possible.

And that’s the really the point of a warranty. It doesn’t guarantee that your machine will be up and running next business day, but it does greatly increase the chance of that being the case. And for those of an “IT is a cost” disposition, having a warranty in place also means that there’s no excuse for avoiding expensive repairs.

And from a financial point of view, while spending a grand here and a grand there to solve issues as they arise is unlikely to put too much of a dent in the cash flow, it is something that can be avoided. It’s one less bill to pay; one less transaction to manage; one less interruption.

No Surprises

If you ask a builder, he’ll tell you that variations always cost more and take longer. If you ask a chef, he’ll tell you that service runs much smoother if every meal is as per the menu. Business it seems runs at its most efficient when things are predictable.

And this begs the question as to why you’d choose to complicate a simple process by trying to save a few dollars up front? The most likely outcome is that it will cost you more in the end. Wouldn’t it just be far simpler to call your point of contact, provide the necessary details, and wait for the cavalry to arrive?

You get your problems solved in the most efficient manner and you have the knowledge that there’ll be no nasty surprises when the bill comes.

Peace of mind for $1/machine/week?

Excellent value!


Today’s Top Takeaway

Always consider the total cost of ownership. It’s nearly always so much more than it appears at first glance.


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