Should You Pay a Premium For a Lifetime Warranty?

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?

The Importance Of Warehouse Clubs

I thought I'd take a cue from the cookbooks of Thomas Keller and write a series about the things (stores, ingredients, techniques, people, etc.) that are essential to eating well on the cheap. My first post in "The Importance Of ..." series follows.

Ah, the warehouse club. That land of 5 gallon mayonnaise jars, 200-roll packs of toilet paper, and row upon row of products that seem best-suited for those with nine children of large appetite. But the modern warehouse club offers more than bulk size products, and I believe that a membership (even though it costs $40-50/year) is an important addition to a frugal foodie's life.

What do I buy at the warehouse club? Household goods like paper towels, toilet paper, soap, and laundry detergent are probably the most common items. But I've also bought cookbooks, clothing, and electronics, all at great prices compared to online stores or even discount stores like Wal-Mart or Target.

As for food products, there are a few things I buy regularly. Frozen chicken breasts and thighs are one, and frozen salmon fillets another. Both are great to have on hand for quick weeknight meals. I don't think you can find a better price on Parmigiano Reggiano anywhere. Soda is a great deal, particularly for those of who need Diet Coke in their veins to survive. I don't often buy huge packs of fresh meat or giant packs of canned goods, but I would definitely do so if I had a bigger family or threw large dinner parties using relatively expensive cuts of meat.

My favorite warehouse club purchase was a cookware set from Costco, a review of which I will be posting shortly. I've also stocked my kitchen with a Rubbermaid Stain Shield storage container set that has is sadly no longer available from Costco.

Costco and Sam's Club both have 100% Satisfaction Guaranteed return policies. In theory that means you can return anything you've ever purchased for any reason, but returns are at the discretion of the manager, particularly if you're trying to return something purchased a long time ago. I can report that last week I returned to Costco a broken year-old DVD player for a full refund. That alone was worth my $50 membership. So if you're buying items that might break within a year or two, such as kitchen appliances or electronics, a warehouse club is your best bet. There's no need to waste your money on an extended warranty. Even better, you can buy food and drink items without fear that you'll be getting something you don't like. If it tastes terrible, just return it.

Warehouse clubs are important. You can get high-quality products at dollar-store prices, particularly if you know how to spot a great value. I don't buy everything at a warehouse club, but the things I do buy there are a better value than I can get anywhere else.

Note: I've belonged to both Costco and Sam's Club, and I must say I'm partial to Costco. If I didn't have a Costco nearby, I'd join a Sam's Club. But given the choice, I'd choose Costco. The product selection is better suited to my slightly upscale tastes. (Example: Costco sells Heinz ketchup, Sam's Club sells Hunt's.) The meat and produce are of higher quality. The gourmet foods selection is greater. The employees at Costco are better paid. (Is this why the employees are more productive in checkout and more helpful with customer service?) My parents belong to a BJ's in Long Island, but I've never shopped there. BJ's appears to only have a 30-day return policy, which may be a deal killer for some.