A friend shares the following:
Here's a funny story- my dad has this wheelbarrow that I swear is older than I am. It's quality, but has a wooden frame that fractured a few years ago and has since been braced. Of course that doesn't stop him from loading it with about 200 lbs worth of logs. Right after he starts pushing it, he hits a bump and the frame cracks, rendering it useless. So we borrowed our neighbor's for the rest of the day, end of story. Then the next day my brother comes over and as we're telling him about the broken wheelbarrow, he picks it up, looks at it and smiles. It's a Sears Craftsman, he says, lifetime warranty. So today my dad and I limped this 25 year old broken rusted up wheelbarrow into Sears and the manager gladly gave us an $80 wheelbarrow at no charge. God Bless America!I'm a big fan of guarantees. In fact, I do most of my food shopping at two places, Costco and Trader Joe's, that have extremely generous guarantees on their products. If you're not happy, you can return the product anytime, no questions asked.
But are guarantees worth it if you have to pay a premium?
My two questions:
1. How much of a price premium does a product with a lifetime guarantee/warranty demand? A good research project would be to calculate the price difference between products of the same quality sold with and without a lifetime warranty or guarantee.
2. When is this premium worth it? If the invested savings from buying the non-guaranteed product grew bigger than the replacement cost of the item before the item broke, then the guarantee would be a bad deal.
I don't have the data to back me up on this, but my guess is that the general price premium for lifetime guaranteed products isn't that large, thus making the premium worth it, particularly if you're risk averse. Any advice from readers out there?