(July 29, 2009) Buy a high-ticket electronics item like an HDTV today and you can be sure the salesperson will try to sell you an extended warranty that’s supposed to protect your considerable investment well beyond the length of time offered by the manufacturer.

Adding a relatively inexpensive extended warranty seems like a no-brainer so many consumers do, yet because the HD Guru frequently receives emails from buyers complaining about difficulties getting the terms of these warranties honored, we decided to investigate.

Not surprisingly, we found that often what you hear on the sales floor, read in the literature and see online is not what you get.

Best Buy, for instance, recently introduced its “Geek Squad Black Tie Protection” plan. It’s “Like Having A Geek Always With You,” proclaims the pamphlet handed out in the stores by blue shirted staff members. “If a product guarded by Black Tie Protection needs four qualified repairs throughout the duration of the plan” the pamphlet assures consumers, “we’ll make sure that you get a new one.”

While that sounds reassuring and in and of itself may provide sufficient comfort to induce one to buy the plan, unfortunately, it’s not exactly true. According to the terms of Best Buy’s service contract rather than being “a new one”, the replacement “…may be new or rebuilt” (meaning used and refurbished)” at our discretion.”

Best Buy’s pamphlet also states that “¦for TVs 30” and up… we’ll loan you a TV ASAP if it looks like we can’t get yours fixed on the first visit. Sounds good, but read the actual service contract and you’ll be surprised to learn that there is no mention of a loaner TV.

Best Buy’s service contract (available upon request at a Best Buy store or on its website) does go to great lengths to state terms and conditions, with the list of terms opening with “This is a legal contract, (hereinafter referred to as ‘The Plan’). By purchasing it, you understand that it is a legal contract and have had the opportunity to read the terms and conditions within.”

However, take the time to actually read the contract rather than relying on the pamphlet and you would also learn that if Best Buy (BB) can’t repair the TV it will “¦replace it with a product of like kind and quality that is of comparable performance, or reimburse you for replacement of the product with a voucher or gift card, at our discretion, equal to the fair market value of the product, as determined by us, not to exceed the original purchase price of your product including taxes  (italics added by HD Guru).

The fair market value is not you might reasonably assume, the price you originally paid, but rather the covered product’s market value at the time of repair as determined by a BB employee. Of course by the time the extended warranty kicks in, the product can be up to four years old and worth next to nothing!

While we can’t cite an actual example of compensation received by a customer for an un-repairable TV covered by Best Buy’s“ Black Tie Protection Plan”, we do know that this past April,Best Buy voluntarily recalled one of its “house brand” Insignia LCD HDTV models (Post Here). Many of these recalled sets were less than three years old and sold new for up to $1000 plus tax. Best Buy provided gift cards amounting to $500 or about half of the original purchase price.

When asked to comment about the pamphlet’s claims versus the written legal contract’s actual terms, a Best Buy spokesperson pointed out that its service contract program’s underwriter, AIG Warranty Group, a division of AIG (yes, that AIG), ultimately determines a covered product’s value.

The spokesperson also acknowledged that despite the pamphlet’s claim, Best Buy’s service contract does not include a loaner program but that the company currently supplies 37″ Insignia LCD loaners to customers whose TVs can’t be repaired during the first service call. Whether the set in need of repair is 32″ or 65″ the loaner is 37″ because it’s the only set size the program offers.

Here is Best Buy’s official response via email (verbatim in bold).

Replacement value

We continue to advocate for the best possible scenario for our customers, and we think they know that. We’ve had virtually no complaints from them about replacements. Replacement value is complicated because the establishment of value for replacement is determined not just by Best Buy, but by the underwriters of our plans.

We’ll continue to work with our underwriters to clarify replacement criteria in our terms and conditions, and to represent the best interests of our customers.  Our progress will be reflected in our service plan literature, and ideally in continued customer satisfaction with our service plan fulfillment.

Timing for loaner TV

We say ASAP in our Geek Squad Black Tie Protection brochure because timing on loaner TVs varies depending on whether Geek Squad is doing the repair – or we’re relying on a third-party.  When we’re doing the job, we can provide that replacement TV immediately, usually right out of our Geek Squad van.  But in some cases, we rely on third parties to reach customers who aren’t in our service area.  Still, we agree that our customers may want more details around when a loaner would be available to them.  And we’ll make changes immediately in our Geek Squad Black Tie Protection literature to include more details about timing.

On line Sellers

Our recent article “On Line HDTV Stores Get Nailed For Consumer Fraud” (Link) reports that a number of Brooklyn based etailers were cited for fraud and fined by the NYS Attorney General. We checked one of the merchants still in business called “Foto Connection” that sells service contracts written by Brooklyn based Consumer Priority Service (dba CPS). We contacted CPS’s customer service department and asked for a copy of its contract. The customer service rep said it’s not available online and that a written request by US mail was required to obtain a copy, not exactly a forthcoming policy for a legitimate company, which we then suspected CPS of not being.

A check of the New York City office of the Better Business Bureau revealed that “BBB processed a total of 23 complaint(s) about this business in the last 36 months, our standard reporting period. Of the total 23 complaint(s) closed in the last 36 months, 21 were closed in the last 12 months. 2 regarded contract disputes;1 Customer Service; 12 Warranty Issues; 3 Refund or Exchange; 3 Repair Issues and 2 Service Issues.”

To Buy or Not To Buy?

Retailers and etailers offer either their own or third party service contracts. Before purchasing either kind, be sure to read it carefully, even if you need a jeweler’s loupe to clearly see the exclusions and other conditions hidden within the contract’s fine print.

HD Guru checked out the service contracts offered by 6th Avenue Electronics and P.C. Richard and Son, two NY/New Jersey Metropolitan area retail chains. Both contracts proved to be far more straightforward and concise than either Best Buy’s or Target’s.  Best Buy’s plan is printed on twenty pages of a 4″ x 8.25″ pamphlet, P.C Richard’s contract terms occupy just 2/3 of a single sided letter size page.

Consider the cost before purchasing a service contract. For instance, Target’s total three years from purchase service contract for a $1300 HDTV costs $79, while BJ’s Wholesale club’s three total years from purchase service contract for the same price TV costs $119. Fined web retailer Foto Connection’s three total years CPS service contract costs $209.30

Best Buy’s four years from purchase date “Black Tie Protection service contract (including the manufacturer’s standard one-year warranty) is $229.99 for a $1299.99 HDTV. In other words you’re paying 17.5% of the set’s total cost for the three additional years of coverage. After reading all of the contract’s terms and conditions, is that a worthwhile investment? Thats your decision!

Remember too that many credit cards will double the manufacturer’s warranty, so check the terms of your credit card(s) before using one to make a purchase.

-HDGuru with Michael Fremer

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