Are pre-paid buy back programs for electronics worth the cost?

I have to give Best Buy credit for a brilliant strategy with their Buy Back program. It seems specifically designed to deal with the fear that if you lay out big bucks for some hot electronics item, it will be a doorstop 6 months from now. They’re trying to avoid people having buyer’s remorse and not buying in the first place because they fear having that feeling down the road.

So the idea is that you can buy the option to have Best Buy later buy back your item at pennies on the dollar, anywhere from 10 cents to 50 cents. The cost of buying this option? It ranges from $40 to $300, based on what kind of electronics item you’re talking about and how much it initially costs.

I’m not fan of this concept, even though I think it’s a brilliant marketing move. But that’s just been my personal bias…until I recently saw Consumer Reports‘ analysis of the program. As they wrote on their blog, “We wanted to see if it’s a good deal for consumers. Our verdict: It’s not.” They do a detailed breakdown of the dollars involved in what you get vs. what you pay. And it’s clearly not a bargain.

So I want to talk to you about my strategy, which can make a big difference in your wallet over time.

The people who get their finances killed by electronics are generally those who buy state of the art. If you look at TVs, the hot thing right now is 3D-ready Edgelit-LEDs, or with those with built-in Internet that are wifi enabled. The not-so-hot things are what I call the “also rans,” which are basic cool TVs that give a great picture.

Here’s the thing: You could buy 2 or 3 “also rans” for what you’d pay for 1 state of the art TV. So if you want to avoid the possibility of buyer’s remorse later, avoid the temptation today and skip the latest and greatest.

I was recently in the store buying a gift for someone. I got them a 42-inch TV for $399. A man came up to me and asked me about the brand. Well, I had no idea about the brand. He wondered why I was getting it and showed me another make and model for $699. I said, “I’m not going to pay $699 for a fancy dancy brand name when I can get a perfectly good TV for $399.”

Besides, Consumer Reports has found the failure rate on flat-screens is so low at around 2% to 4% that it’s almost statistically meaningless.  Well, the guy went and got the one for $399 himself instead of the $699 model!

Think about it in your life: Why buy an option for the right to sell back electronics at pennies on the dollar? Why not just save upfront instead by avoiding the latest and greatest technology in the first place and going for the “also ran?”