Originally Posted By: Mackelroy
Originally Posted By: jimbrewer
Yes. It's good protection at a fair price. Still probably a money maker for Dell
In a roundabout way, it's a legal requirement that Dell make a good faith effort to sell warranty at a profit. ( Deliberately selling below cost warranties in order to push product out the door is really a way of overstating current profit and a form of securities fraud.)
Don't understand , Dell is a private company, how is that securities fraud?
Even if they were public, don't see the issue. They offer a warranty, what ever price they want, as long as they fulfill the agreement. Who's gonna complain?
You are right: Dell is private now.
Best Buy got into trouble for this years ago. They sold el cheapo warranties, sales went through the roof, they posted great financials---then the chickens came home to roost. The people who bought stock during the good times argued that Best Buy had been deceptive. If you sell a complicated electronic gizmo for $600 and then sell an extended warranty for $20-$30 bucks, when you can reasonably expect your warranty cost per unit to be say, $75, What you've really done is overstate earnings by $40 per unit. Plus, you reported a lot more volume than you should have had you been accurately pricing the product.
My recollection is that Dell made about 12% or so on the warranties according to their financials back when they were a public company. OK, but not a real profit center. Not like the computers themselves.
If you look at Ford's financials they are very careful to say that they price their ESP warranty based on their claims history and cost--no guesswork and hidden deferred discounts.