There is only a limitation on computers (6 months). If you ask, they will tell you 1 year, but my father in law is a manager at a Costco in New Jersey, & basically as long as you didnt run over it with a truck, you can bring anything back, anytime. You dont even have to have your receipt, they can track your purchases by your member #. But it makes it alot easier for them.( & in turn, easier on you.)
Keep in mind that the 360 is more of a hybrid than a console. As far as longevity, it leans towards its pc roots. It suffers from 2 major failures (when it messes up), either software, or overheating (#1 360 killer). You have to keep a lot of airflow around it. If you stick it in an entertaiment center where it barely fits, it will overheat, plain & simple. That little Nyko fan add-on actually works well. As for the software, it may just need you to clear it's cache.
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I worked at EB for a year & i cant stand the way they do business, treat customers, & now that they are gamestop, its even worse. So im a little partial to buying it anywhere else. The downside to getting the warranty is unless the failure is within the original return period, then you just ate it on 50 bucks because you happened to get the glitchy one. When they hand you that new 360, you have to buy another warranty to cover that one. You think they take a hit on that console? No it goes back to Microsoft & they get credited for it. Bam, they just pocketed your $50.
Microsofts cust service is decent, depending on who you get you may have to fight a bit to get authorized to return, & the turnaround time is iffy, but its free.
I sent my psp to sony because it was collecting lint on the screen under the front housing & three weeks later i had a brand new one. The reason everyone notices the failures of Sony so much more is because there are so many more PS2's than Xbox's in households. Simple statistics, the larger the pool, the larger the failure rate. (That being said ive been through two of the big ones & 1 of the small ones, but that was laser failure i used em all as my primary dvd player).
So be careful going with the individual experiences, look at the larger picture. The failure rate of the 360 is lower than the ps2, but higher than the original xbox. I expext the PS3 will have the highest failure rate yet, but it will also have a higher initial production volume, newer technology, and bigger expectations.