Why You Still Shouldn’t Care About AppleCare

Back in 2006, I wrote a column titled “Should You Care About AppleCare?” In it, I weighed the pros and cons of purchasing AppleCare when buying a Mac. I strongly recommended against getting Apple’s extended warranty: “AppleCare is almost always a bad choice.”

With the 2011 holiday season upon us, many many many people will be getting Apple products as gifts over the next few weeks. They will all have to decide whether or not to purchase AppleCare for their new devices. As such, it seemed like a good time to reconsider the merits of AppleCare — this time with a focus on iOS devices (iPhone, iPad and iPod touch).

My conclusion remains essentially the same: AppleCare for iOS devices, and especially AppleCare+ for iPhone, are still a bad bet.


It’s not just Apple; extended warranties are a bad bet in general

Check out any issue of Consumer Reports (CR) that mentions the topic of extended warranties. Their advice about these warranties is always the same: Avoid them. As recently as the November 2011 issue, CR reiterated: “Extended warranties for most electronics and household appliances aren’t worth the money.” Why? Because the average cost of a repair is “not much more” than the warranty price — not to mention that, for most electronics, you’re not likely to need a repair during the warranty period.

Consumer Reports does hedge a bit. Despite their general disapproval, they offer two reasons to consider an extended warranty for computer devices.

First, if you want the handholding of additional technical support, an extended warranty can be worth it. With AppleCare, for example, you get one year, rather than 90 days, of “free” telephone support. Especially if you live near an Apple Store (where you can make an appointment with a Genius), I doubt telephone support matters much anymore. But if it does matter to you, get AppleCare. I concede this point.

Second, CR suggests that an extended warranty may be worth buying for mobile devices (such as laptops and smartphones) — if the warranty includes theft and accidental damage coverage. The logic is that devices that leave home with you are far more likely to be stolen or damaged than stay-at-home devices. As you’ll see in a moment, I part ways with CR here.

Extended warranties cover less than you may think

If you put an extended warranty under a magnifying glass, you’ll likely find that it covers less than you thought.

For example, AppleCare for iOS devices “extends your service coverage to two years from the purchase date.” However, you already have the first year covered without buying AppleCare. So the cost of the coverage is really paying for just one year: days 366 to 730 of ownership. Problems before that are covered for free. Problems after that aren’t covered even with AppleCare.

Except for AppleCare+ for iPhone, AppleCare does not cover any damage due to “accidents.” So if you damage your iPad by dropping it or spilling water on it, you’re not covered even with AppleCare. You also aren’t covered for loss or theft under any circumstances.

In years’ past, AppleCare was sometimes recommended just for its battery coverage. AppleCare does cover you for a battery that has “depletion of 50 percent or more from the original specification.” I would argue that, in most cases, this doesn’t mean much. A truly defective battery will almost certainly go bad in the first year. In most other cases, especially with the improved batteries in Apple’s most recent hardware, an original battery should last more than two years.

One more point to consider: An iOS device that is replaced out-of-warranty or that has less than 90 days of coverage left, gets an additional 90 day warranty from the date of replacement. Assuming you don’t buy AppleCare, the replacement warranty makes it very unlikely that you’ll have more than one out-of-warranty repair in the first two years.

Anecdotal evidence is worthless

With the same certainty as the sun rising in the morning, any discussion of AppleCare inevitably leads to people relating their personal anecdotes. I can already anticipate comments such as “My iPad’s [fill in your favorite part] stopped working after it was more than a year old. Because I had AppleCare, Apple replaced the entire iPad at no charge. I saved [fill in the appropriate number] hundred dollars. Count me as someone who is glad they purchased AppleCare.” 

The problem is that such anecdotes are worthless in deciding whether or not AppleCare makes good financial sense. For every anecdote that supports one viewpoint, I can find another that argues against it. In my case, for example, I have never purchased AppleCare on any Apple product. Yet, during more than 25 years of purchases, I only once had to pay for a repair that would have been covered by the extended warranty. Add up all the money I saved by not buying AppleCare, and I clearly made the right decision in hindsight. But this too is an anecdote. It should not be the basis of your upcoming decision regarding AppleCare.

Essentially, as with any insurance, AppleCare is a gamble. You don’t decide whether or not a gamble is worth it based on anecdotes of prior outcomes. Instead, you try to predict the expected value of the purchase. To do this for AppleCare, you need to consider the cost of the warranty, the cost of an otherwise un-covered repair, and the likelihood that you will need such a repair.

If the potential savings are huge, AppleCare could be worth it even if the probability is low that you will save money (that’s the logic behind medical insurance, for example). Otherwise, AppleCare only makes sense if you’re likely to come out ahead financially. I believe the latter more accurately reflects the situation for AppleCare.

Let’s take one example. AppleCare+ for iPhone costs $99. If you get a new iPhone every two years (when your phone contract expires) and purchase AppleCare+ each time, you’ll pay about $500 for AppleCare+ over ten years. The key question is: How likely is it that you will spend more than $500 in out-of-warranty repairs over that time? Remember that, in this case, you have coverage for five of these ten years, even without additional AppleCare. Given the overall excellent reliability ratings of Apple products, and assuming you make at least a minimal effort to care for the devices, I expect the probability to be very low.

The case against AppleCare+

The case against AppleCare+ for iPhone is even worse than just described — if you include the cost for accidental damage replacement. AppleCare+ covers you for “up to two incidents of accidental damage, each subject to a $49 service fee.” This new damage coverage is the “plus” in AppleCare+. While this may seem like a good deal at first, consider the following:

According to what I’ve been told [Update: and as confirmed on an Apple webpage], Apple will replace any damaged out-of-warranty iPhone with a refurbished model for a flat fee of $200. To get a replacement under AppleCare+, it will cost you $148 ($99 for the warranty + $49 service fee). In other words, AppleCare+ will save you only $52 — compared to getting an non-covered replacement phone. In addition, in order to have a chance at this $52 saving, you need to outlay $100 on an extended warranty that you will most likely never need. In the end, you are more likely to lose $100 than save $52. To me, this makes AppleCare+ a sucker’s bet. I’d rather take my chances and pay the $52 if I lose.

One last bit of data to throw in the pot: Apple has a long history of replacing out-of-warranty devices for free — most especially if the device is just recently out-of-warranty and the problem is viewed as a “manufacturing defect.” This has happened to me on several occasions. While there are no guarantees here (and I’ve heard that Apple is now less likely to do this than in the past), it further lowers the probability that AppleCare will pay off in the end.

Bottom Line

“You’ve got to ask yourself one question: Do I feel lucky? Well, do ya, punk?” — Harry Callahan

Unless you’re feeling very lucky, my recommendation is to avoid AppleCare. I can’t promise that everyone who follows this advice will save money in the end. But I can promise that the odds are that you will.