Is warranty worth it?

I was just trying to figure out whether extra warranty is worth the price. Lenovo offers 2 years extra warranty (on top of the standard 1 year) for $210 (Canadian).

Suppose the machine has a 15% chance of failing when it's 1-3 years old. If you have no warranty, your expected loss is 0.15 * $1200 = $180 (assuming the machine cost roughly $1200). But this also assumes that the failure is catastrophic; i.e. not the hard drive (which can be replaced), nor the memory, keyboard, etc. Is the probability of catastrophic failure really that high in the 1-3 year range? I've never owned a laptop, so I wouldn't know. But my desktops all last much longer than that. That's why $180 feels to me like an upper bound on your expected loss.

So it seems that it's better not to get the warranty. Factor in the fact that if the machine fails when it's old, you're more likely to be thinking of replacing it anyway. Suppose you only plan to keep the machine for 3 years. If we also suppose the machine's value decreases linearly as it ages, then your expected loss is the integral of the below expression over the 1-3 year period (the machine's unprotected lifetime):

0.15/2 * $1200 * (3 - years owned) / 3 (the 2 is there so that the integral of the failure density function comes out to 0.15 over the 1-3 year period)

This integral comes to $60 (of course this assumes the machine's chance of dying doesn't increase as it ages, but 15% already seems pretty high to me!). You can also compute that in order for the $210 warranty to actually be worth it, under this model of depreciation, the probability of catastrophic failure in the 1-3 year range would have to be greater than 52%.

Warranty does have one redeeming factor, which is that if this laptop happens to be your only machine, and you absolutely _must_ have a machine at all times, Lenovo might send you a replacement quickly (under certain kinds of warranty, anyway). Actually that warranty costs $300, which means that the probability of laptop death in the 1-3 year range would have to be an almost absurd 75% in order for the warranty to be worth the price.

Wow, that was a long rant-like-thing. Anyone have any strong opinions one way or the other?

 

There are a couple of things to consider about laptops vs. desktops in terms of warranty:

1) Laptops move around and generally live a harder life than desktops. Thus they are more likely to fail.

2) Laptop repairs are expensive. Parts are proprietary and hard to get to. If your desktop motherboard dies, you can easily find a cheap replacement. If your Thinkpad motherboard dies, your only option is to pay Lenovo $6-700 for a new one.

I think you have a good handle on the cost-benefit analysis. In the U.S., the 3-year warranty is only $100 more than the 1-year, so IMO it's a good buy. I'm not so sure it's a good buy at $210.

 

I see you have knowledge of Calculus and Statistics;
As a rule of thumb, you should buy warranty for anything you cannot afford to lose.

It's really a personal matter; but for me, laptops (and technology) in general seem to break often. I decided to shell out the extra $200 (USD) for 3-year on-site + accidental because things are wild in a college environment and I can't go long without a computer.

 

I realize that, but still...15% seems awful high! But maybe I'm wrong about that.

Oh I agree with that. I would consider that catastrophic failure and count that as costing you the entire value of the machine.

 

Accidental damage adds an interesting dynamic to the whole thing, because it kind of lets you change your attitude towards the machine. You can stop worrying about damaging it because Lenovo will owe you a brand new one if you do! So it makes this kind of analysis a bit more tricky. Accidental damage protection buys you a certain other kind of peace of mind.

 

Does not make me any less concerned for my laptop.
Besides, it's not like Lenovo will continuously supply you with a stream of laptops because you keep destroying them.

The extra money spent will be a good investment in any case; even if you never end up using it.

 

From a business standpoint, lenovo must at least break even with the warranties, or else it would be wasting money. They should calculate how much the warranties cost them, and then charge an amount that allows them to cover that and then some. If your calculations in the first post did Not come out to be "not worth it", then I would think your calculations were off.

However, on a case by case basis, it's different. For me, I am very glad I got the 3yr warranty on my t43. My motherboard started going out, and instead of it meaning the end of my laptop, all it cost me was a day and a half without a computer. I also broke a key off the keyboard and they sent me one for free. So I didn't hesitate to get the 3yr +accidental warranty on my x200. It's an annoyance to pay for it now, but it's worth it for the piece of mind.

 

No, it's not worth it, trust me.

 

You really need to look at how much you are paying, how long you will keep the laptop, and the chance of damage.

Laptops this days are, to me, approaching commodity; it's the data that matters, not the device.You can get a general purpose laptop for $400. You can get a good one for $900 and a really good one for $1,300.

The capabilities go up and the cost goes down. It used to be a laptop was $5K...then $3K, then $2.5...now they can be had new for $500. And the reliability has gone up.

Think about the laptop you buy now for $1000...and the warranty is $200...that's 20% of the cost. IMHO, you are better off putting that money to your next laptop.

If you charge it on your Amex or other credit card, many already double your warranty to two years.

The only reason to get the warranty is:

a.) if you have no other laptop to switch to (and can't affford to get a cheapo one to tide you over while it's in the repair depot
b.) you need next day onsite fix (ala business) (can't afford to wait for the depot to fix)

For a person, I would not get the extended warranties. For a business, I would.

 

It seems the warranty is not worth it, especially if you have other computers. Maybe it was a bit harsh of me to let the machine's value decay to 0 in 3 years, but even if you assume that it decays exponentially to $400 in 3 years (which is generous), and that the probability of laptop death increases linearly from 1-3 years, it comes out that the probability of death in 1-3 years has to be greater than 38% in order for the warranty to be worth it.

And you're right, paying 20% of the machine's value in warranty doesn't seem right.

 

You do know that you can buy a machine now with no warranty and have 1 year to buy a regular warranty from Lenovo(you have time to decide). But you have 30 days to buy accidental after purchase.

 

That's good, but that doesn't really change much. It's still worth it only if you believe the machine has a ridiculously high probability of dying. But maybe after having owned it for a year, you'd be in a better position to make that judgment.

 

The things is you are not going to lose $(cost*probability), which is only a portion of the laptop's cost. You either lose the entire cost($1000+) or $200.

I would not use expected value to calculate the outcome of a single purchase; with high 'n' on the other hand, it is worthwhile to do statistical analysis. That's why insurance is a business.

 

I have two X40's and one T42p and both had the 4 year depot w/ accidental protection and it was great.. one of the x40's mainboards just died the other day and had to be replaced and obvioulsy it was covered with the warranty.. the other x40 also had a bad mainboard, but I forget if it was within the first year or not.. it was covered regardless, but it might have been during year two. seems plugging in my iPod fried the USB ports (twice)

all 3 laptops have had the keyboards replaced (multiple times).. less for real "failure", more for just loss in its "springyness"..

All have had the AC Adapters replaced due to breakage of the connectors

one of the X40s had the bezel (palm-rests) replaced 2 times due to hairline cracks sometime in year 3.. that was only covered due to the accidental protection part of the policy..

these laptops have been heavily used for 4 years now.. and i defineatly got my use out of the warranty and the laptops.. from my standpoint they are terrific machines.. years 2 & 3 were fine.. it seems year 1 (any manufacturing defects if any) and year 4 (ok, starting to show its age) are where most of the stuff was done..

as with anything, it all depends on the user.. in my case I found it very useful to have (though without the accidental protection, who knows what would have been covered)..

I am shortly about to replace all 3 with new x301's, I plan to get the 4 year warranty, with Accidental protection and with the additional HDD warranty option. The only difference is this time I am going to do the OnSite instead of Depot, although the Depot was very fast last time.. Its my main laptop and I had a hard time losing it for even 2 days the couple times I had to actually send it in.

not sure if that helps at all.. but that has been my experience.

 

Can't you insure it in some other way? In Norway you can get dirty cheap laptop insurance through diff student organizations etc.

 

Just wait until the first year base warranty is almost up and make your decision from there. If it's not going to fail within a year, it has a pretty good shot of lasting a few more. You don't have to upgrade to a 2-3-4 year now...just wait and make the decision later!

 

For Lenovo, warranties must be cost effective, or perhaps even profitable, even if they only charge $210 (Canadian) for the additional two years of warranty. Their warranty pricing is based on a couple of unknowns.

1) What is the average cost of a repair over a running three year period for Lenovo for notebooks? Obviously the repair/replacement costs for Lenovo will decline over the entire warranty period as production costs decline and other newer models are introduced. This is balanced out a little bit by the fact there might be a slight increase in the failure rate over time. However, as noted by chun9430, most failures occur at the beginning of the life cycle of any specific unit.

2) What is the average failure rate per production run? Remember, not every unit is going to require servicing or repair. So Lenovo will make a 100% monetary return on each reliable unit that never requires service. For example, say they manufacture 100 units and they have a 10% complete failure rate on all of these units that were under a three year warranty program. They would have 90 x $210 ($18,900) to cover the costs of servicing or replacing the 10 bad units. That would be $1890 per unit, more than enough to replace all of the units especially if they are lower end models. Note that the cost of the warranty is a fixed price rather than a percentage of the cost of the unit. That means that the warranty is better value on expensive units and less of a value on inexpensive units.

How does that affect you (or me – as an Enduser )? You are really just buying insurance if you pay for additional years of warranty coverage after the first year. The questions to ask yourself are – is $210 worth peace of mind for an additional two years to get your notebook fixed or replaced if you have a catastrophic failure and – in the case of less than catastrophic failure, will it cost you more than $210 to repair the unit yourself or have Lenovo or a local shop repair it? If you think the answer is “yes” to either of these two questions then it is worthwhile to pay the price of the insurance and buy two more years of warranty coverage.

If the answer is no, then save your $210, hope that your unit does not fail, and apply that money to your next notebook purchase.

 

I don't agree with that. When a 3-year-old laptop dies, you don't lose $1200. You got 3 years of service out of it. But I was probably incorrect to assume the laptop depreciates to $0 in 3 years. In any case, it would cost you maybe $400 to get a laptop with similar specs to replace it. That's how much a refurbished T43 goes for nowadays, and they cost more like $2000 3 years ago.

That's good to know. This also reads a bit like a criticism of Lenovo's quality!

That's definitely the right thing to do.

Good to know offering the warranty is worth it from Lenovo's perspective

 

here is what i think about the warranty, based of reading what has already been said, it seem like most of the problem comes from the fault of the laptop, cpu crash etc, which has left the "accidental" out. think of it this way, if your laptop will only be moved a dozen times in one year, then a warranty would be useless, however, if you plan to move your laptop daily, then the warranty becomes a must have ( i think). through last year, my friend had drop his laptop 3 times because he had to move it around everyday on campus. even tho his laptop survived, the damage caused by this have render his laptop almost untouchable. the heat on his laptop can cook a egg ( trust me, we tried and it worked). because his doesnt have warranty, his 750 dollar laptop is now a cooking machine. so you arent going to move your laptop ( wondering why you would need a laptop) then a warranty would be a waste. but if you do move it, the accident will most likely happen and the cost to fix it will most like be the same as a warranty or greater.

 

I totally can see how it can be read like that.. but not my intention.. lets face it.. these are electronics, lots of part, etc.. things break, not often, but they do.. i have been VERY happy with my x40's and the fact that 4 years later I am still typing on it, at least for me, says a lot.. I am a heavy user (travel with it every day, and probably using it 10 hours a day, every day.. since the day i got it.. November 2004 to be exact.. ) the fact that this machine still performs for me, says a lot.. but again, thats my take.. warranty, auto-insurance, health insurance.. its all the same.. you dont need it till you need it, and they your really thankful you had it..

most of my clients companies deploy Dell laptops to their employees, and they are always having hardware issues.. I'd say for every 10 of theirs.. i might (might) have 1, and its minor.. its a tricky thing warranties.. my harddrive in my x40 had a couple of issues once.. and so did my wifi card.. again.. sounds like a lot of things.. but this is over 4 years.. with it on 24 hours a day and being "used" 10+ of those hours a day, 7 days a week.. I think its rather small.

Also, I wouldnt be looking for replace it with the x301 if I wasnt a fan of Lenovo.. hopefully I enjoy the x301 as much as I did the x40

the other thing to think about is although it may be $300 (or whatever the $ is).. but at least in my case.. 300 today will save me $2000+ in a couple of years.. becuase if the laptop does die, and I am going to buy another one at that point.. there is no way i am going to get a 3 year old spec'd laptop.. of course I would buy a newer model, better specs.. etc...

so if you plan to keep the laptop "longer" then I would suggest the warranty, it basically ensures your investment over the entire period of time.. if your probably going to be replacing it anyway after a couple of years.. then I guess it doesnt really matter..