Are 3 Year Warranties All They’re Cracked Up To Be?

We recently ran a special on all our systems, offering a free upgrade to a three year warranty.  To be honest, in the current economy, I did not expect it to be terribly successful — I thought that (at this time) price was the biggest factor, and that monetary discounts might yield better results.  I was wrong!  The free warranty upgrades were wildly popular, and we showed a 300% boost in sales during that time.  Why do you think that is?  I'd love to hear your thoughts in the comments section below!

One of the first things that we did following the success of that special, was to take a careful look at our industry, to see what other companies were doing.  Check out the following, vastly simplified information (let me know if you see anything not accurate!):

      Default Warranty
Company Return Period Restocking Fees Parts Labor Shipping Tech Support
Puget Systems 30 days 15% 1 year lifetime 30 days lifetime
WidowPC 30 days 15% 1 year 1 year 30 days lifetime
Alienware 30 days 15% 1 year 1 year 1 year 1 year
Maingear 30 days 20% 9-14 months 9-14 months 30 days lifetime
VoodooPC 30 days 10% 1 year 1 year none 1 year
Vigor Gaming 30 days none 3 years lifetime none 3 years
GamePC 30 days 15% 1 year 1 year none lifetime
PC's for Everyone 20 days unknown 3 years lifetime 3 years 3 years
Cyberpower 30 days 15% 3 years 3 years 3 years lifetime
Apple 14 days 10% 1 year 1 year 1 year 90 days
Velocity Micro 30 days 15% 1 year 1 year 90 days 1 year
AVADirect 30 days 15% 1-3 years lifetime 5 days lifetime
Digital Storm 30 days Market value 3 years 3 years 30 days lifetime

What you'll notice is that Puget Systems' policies are on par or better than industry average, except for our parts warranty. With a few exceptions, the only companies offering parts warranty as "bad" as 1 year are the extremely large companies — not good models of quality service! This has us thinking carefully about permanently increasing our parts warranty to three years on all systems. 

Before you say "of course, give it to us!", keep in mind that funds have to come from somewhere.  It is the role of Puget Systems to take the profits we earn from our system sales, and decide how to best invest those funds back into our customers.  We don't spend a lot on marketing, and we're not just taking that money home!  We feel firmly that our best long term strategy is to keep enough profits in the bank to be safe from market fluctuations, but that everything else goes right back into the customer.  I am making that very clear because it means that if we increase our warranty to three years, there is a cost associated with that, and that means that we don't have as much to invest elsewhere (additional technicians, better testing tools, etc).  My point:  there's no free lunch, so consider that before giving your input.

My Arguments Against 3 Year warranties

One argument I can make against three year warranties is that they are not all they're cracked up to be.  What will your computer look like in three years?  More than likely, any failed part will be able to be replaced with a modern equivalent at 1/10th the cost.  If you buy a NVIDIA GTX280 video card today for $450, it is very likely that if it fails in three years, there will be an $80 video card that will not only put it to shame, but will do with with less heat and less power draw.  Moore's Law at its best!

If the cost of replacement is so low, then what's the big deal?  Why not have Puget Systems pick it up, and reap the benefits of sales today?  The problem is that it isn't always so simple.  After three years, it is often the case that the part in need of replacement is no longer available.  What happens if your CPU is no longer available, and to replace it you are forced to upgrade your motherboard, memory and video card?  That's exactly what people who bought AMD socket 939 systems are experiencing today.  To me, this is a matter of setting proper expectations.  If Puget Systems puts 3 year warranties on all systems, we'll have the moral obligation to make costly accommodations to facilitate these problems.

My Arguments for 3 Year Warranties

The arguments for three year warranties are much simpler — it makes Puget Systems more attractive.  It is a simple concept, and no one will say "no" to a longer warranty.  The sheer length of this blog post is a good indication that the arguments against longer warranties is complex, and I just don't think many people take the time to think it through.  

So what do you think?  Are 3 year warranties actually more costly to the customer?  If they are, do you think Puget Systems should take the route of educating our customers on the issue, or is the issue too complex and controversial to take on?  What would you like to see, if you are buying a computer?