Another Broken Nexus 5

In late 2013 I bought a Nexus 5 for my wife [1]. It’s a good phone and I generally have no complaints about the way it works. In the middle of 2016 I had to make a warranty claim when the original Nexus 5 stopped working [2]. Google’s warranty support was ok, the call-back was good but unfortunately there was some confusion which delayed replacement.

Once the confusion about the IMEI was resolved the warranty replacement method was to bill my credit card for a replacement phone and reverse the charge if/when they got the original phone back and found it to have a defect covered by warranty. This policy meant that I got a new phone sooner as they didn’t need to get the old phone first. This is a huge benefit for defects that don’t make the phone unusable as you will never be without a phone. Also if the user determines that the breakage was their fault they can just refrain from sending in the old phone.

Today my wife’s latest Nexus 5 developed a problem. It turned itself off and went into a reboot loop when connected to the charger. Also one of the clips on the rear case had popped out and other clips popped out when I pushed it back in. It appears (without opening the phone) that the battery may have grown larger (which is a common symptom of battery related problems). The phone is slightly less than 3 years old, so if I had got the extended warranty then I would have got a replacement.

Now I’m about to buy a Nexus 6P (because the Pixel is ridiculously expensive) which is $700 including postage. Kogan offers me a 3 year warranty for an extra $108. Obviously in retrospect spending an extra $100 would have been a benefit for the Nexus 5. But the first question is whether new phone going to have a probability greater than 1/7 of failing due to something other than user error in years 2 and 3? For an extended warranty to provide any benefit the phone has to have a problem that doesn’t occur in the first year (or a problem in a replacement phone after the first phone was replaced). The phone also has to not be lost, stolen, or dropped in a pool by it’s owner. While my wife and I have a good record of not losing or breaking phones the probability of it happening isn’t zero.

The Nexus 5 that just died can be replaced for 2/3 of the original price. The value of the old Nexus 5 to me is less than 2/3 of the original price as buying a newer better phone is the option I want. The value of an old phone to me decreases faster than the replacement cost because I don’t want to buy an old phone.

For an extended warranty to be a good deal for me I think it would have to cost significantly less than 1/10 of the purchase price due to the low probability of failure in that time period and the decreasing value of a replacement outdated phone. So even though my last choice to skip an extended warranty ended up not paying out I expect that overall I will be financially ahead if I keep self-insuring, and I’m sure that I have already saved money by self-insuring all my previous devices.

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