Should I Get AppleCare?

The Eternal Question

AppleCare

As you walk out of the shop, excited to get home and unwrap your new computer, you try to make sense of the salesperson towards the completion of your transaction. They might have assured you they weren't on commission, and then in the same breath been overly effusively about the virtues of 'AppleCare'. Their explanation of it though, was more confusing than when you asked them about the differences between Intel's i5 and i7 range.
Perhaps after a few questions, and always begrudgingly, they might have told you that you have the first 12 months of your new computer's life to get this product that they seemed unreasonably happy about. What is it?

The Benefits

When you buy a brand new Mac, from the date of your purchased, you get a 1 year warranty, and 90 days of free telephone support.
AppleCare extends both of these, meaning that in total, from the date of your purchase, you'll get 3 years of hardware warranty, and 3 years of telephone support.

Furthermore, if you buy an Apple Cinema Display with your computer, it too will be covered in the same manner as your computer. Any subsequent purchases of Apple peripherals, such as keyboards, mouses, Time Capsules, and AirPort devices, are also are covered (both warranty and support) for the full 3 years.

Statutory Warranty

Interestingly, the legislation that supersedes the Trade Practices Act 1974, the Competition and Consumer Act 2010, suggests that there is no fixed time frame for obtaining, from the place of purchase, a remedy for a good that is not of merchantable quality. If you are having problems with your computer, keep in mind that the ACCC can be of great assistance in such circumstances.
For the simplicity of analysis, I will assume that the maximum statutory warranty is one year; this has in the past been the generally accepted term in the IT industry.

Cost & Benefit

Two distinct components comprise AppleCare: the hardware warranty, and the phone support.

Hardware

Sadly, Apple does not publish the mean failure rates of its hardware. Fortunately, SquareTrade, who that sells warranties, has analysed the failure rates of over 30 000 computers (pdf), including some of Apple's laptops. The kind of failures that AppleCare covers – hardware malfunction, as distinct from accidents – are at around 11% after 2 years, and 17.4% after 3. So, we can take an estimate of the expected rate of failure after 3 years as E \left [ x \right ] = 0.174 . Given that this is data has been generated from insurance claims, it's also fair to imagine that these are claims which are not frivolous, and would have otherwise necessitated the purchase of a new computer.

We next turn to the pricing of computers, and their respective AppleCare warranties.


Rendered by QuickLaTeX.com

So, with little surprise, we can see that you're pay a premium approximately between $65 and $107 when you purchase AppleCare for your laptop, and only your laptop.

In the preceding table, I have chosen the cheapest models of the four classes of laptop that Apple sells. Upgrading only the memory on each of the models paints much the same picture.


Rendered by QuickLaTeX.com

Peripherals and Further Upgrades

It is important to keep in mind, as I suggested, that you can easily add things to your AppleCare coverage. Peripherals are included, as are other upgrades, such as increases in storage capacity and CPU speed. The following table details the minimum amount of money you'd have to already plan on spending, in addition to the purchase of your computer, to justify a rational purchase of AppleCare.


Rendered by QuickLaTeX.com

Phone Support

This analysis so far has only included the implications of hardware failure. This is the most obvious aspect of AppleCare, but the phone support can be helpful for people who aren't confident with their computers. Personally, I've always found  their level 1 support staff helpful and generally knowledgeable. Your own access to technical support will likely determine the worthwhileness of this aspect of the product.

Conclusion

As you might expect, this product likely comes with a premium attached to it. That premium, if you buy a basic computer, and never call the support line, is around 20-25% of the price of AppleCare. However, the reasonableness of buying AppleCare quickly increases if you consider any of: buying other Apple products that work with your computer, upgrading your computer when you buy it, or calling the support line.