On Warranties

warranties_suckI’m the least handy person I know.

The Fourth Law of Thermodynamics in my household states: “Physical objects that appear to be broken, will remain broken through time and space.”

I carry my un-handyness with me through life, including matters having to do with cars. When I came up with a flat rear left tire a few weeks ago on the way to drop off the girls, I rolled into the national-chain tire store a block away from their school. We walked from there.

Tire guy called me a half-hour later. (I will now paraphrase our conversation.)

“Your tire is unfixable, we’d recommend replacing that. We also noticed your two fronts are about three years old, have seen some wear-and-tear, and we are coming up to the fourth-year factory-recommended replacement time. So you should probably have us put new ones on there as well.”

“Ok, how much will that be?”

Now, as I mentioned, I am not handy. This places me at a specific disadvantage when it comes to having people diagnose and fix physical things for me, like my car’s tires. Tire Guy could have used some Walter Mitty-speak (“Uh, sir, we’re noticing the bifurcated invertabrator is missing three hamnails, and we’d recommend slotting in a T-bolt in the five-square”) and I’d probably agree to get those things fixed as well. I mean, how could I argue with him? It sounds legit.

A crucial error


But then Tire Guy made a crucial error. He quoted me the price for new tires. It was roughly $90 for one tire, including – he wanted me to know – a very good deal on a warranty, or $270 for three tires, again including a great deal on the warranty, plus labor. That put me all-in around $330.

Ok, that’s a lot, and I don’t know anything, and I knew I’d probably have to agree to that price.

But I do know one big rule of personal finance, which I will now pass on to all of you, and which constitutes the entire purpose of this long-winded tire story:

Warranties, generally speaking, are bad.

“So ok, $330, that sounds like a lot,” I tentatively began, “how much would it be without the warranties?”

“Oh well, you see, that was a really good deal on the warranties,” he began to reply.

“Ok, I get it, but let’s say I want to skip the warranty?

“Let me recalculate here. Um, yeah, it looks like about $385 without the warranty. You see it’s all part of the package deal.” (Please note: $55 bucks more without the warranty)

“No. I don’t see. That’s not right. You can’t offer me something supposedly valuable, like a warranty, and then charge me more when I remove the warranty. Excuse my language, but that’s…”

…And…you’ll have to imagine the classy and stylish way in which I expressed displeasure to emphasize my point.

“Well, let me see here, ok, I suppose I could replace the three tires – without the warranty – for about $315.” (or about $5 less per tire without the warranty.)

More tire warranty details

Now, my finance-guy curiosity took over. I wanted to know more details about this supposedly good-deal warranty.

“If my new tire needs replacement while I’m still under warranty, would it be free?”

“Not free, but it will only cost you only $20 to replace.”

“If I have a warranty with you guys, can I get the tire replaced anywhere else?”

“No, we’d be the only ones to honor the warranty.”

“Ah, I get it, so you want me to pay part of the cost today of the next tire needing replacement, and I have to do the work at your shop, rather than anywhere else where I happen to get a flat or have a problem. So really the point of the warranty is to get me to come back only to your shop?”

“Well, not exactly, but see they do want us to sell these warranties…”

“Forget it. Don’t do three tires. Just replace the one tire, no warranty.” And then I told him the problem of misleading customers – especially gullible and unhandy ones like me – is that customers who lose trust in their service-provider generally don’t come back. That’s a separate issue from a warranty, of course, and a fundamental rule of business, but an important point nevertheless. I will do my darndest to avoid going back there.

Rewinding for a moment, however, to review the personal finance issue of warranties: For most electronic devices and most household durables, most people most of the time would do better to forgo paying for a warranty. It’s a kind of excess insurance-policy that you should avoid, unless special circumstances apply.

Another warranty story

What even is this thing?

I remember purchasing in the early ‘00s a totally awesome stereo-component: A 100-CD changer (roughly the size of an overseas shipping/railcar container, if memory serves me correctly). The Best Buy salesman really, really, really wanted me to get that warranty. I found it odd that he focused on the high likelihood of my totally awesome 100-CD changer breaking within the next year, as I had not even left the store yet. I declined. I’m happy about that choice, even though of course it broke within three years, because by then Apple had begun to render moot all legacy music devices, with the iPod.

And I know what your next question is:

“What’s a CD?”


A version of this post ran in the San Antonio Express News.

Please see related posts:

Audio Interview – Wendy Kowalik on Insurance

Longevity Insurance – Do You Feel Lucky?

Guest Post by Lars Kroijer – Don’t buy too much insurance

On Insurance Part II – The Good, The Bad, The Optional



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4 Replies to “On Warranties”

  1. Warranties are typically profit for the merchant and underwriter. Helpful tip to readers: if you ever decide to purchase a warranty, ask to see the list of exclusions PRIOR to forking over your dough.

  2. First crucial error was even considering 3 tires. Always buy at least two (new tires go on the back) or 4 if the best two show the need to be soon replaced.
    Never heard of a fourth-year-factory replacement time. But I have only been driving 58 years. And I do not have the un-handyness gene.

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I founded Bankers Anonymous because, as a recovering banker, I believe that the gap between the financial world as I know it and the public discourse about finance is more than just a problem for a family trying to balance their checkbook, or politicians trying to score points over next year’s budget – it is a weakness of our civil society. For reals. It’s also really fun for me.

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