It seems like everything you buy today prompts you to purchase an extended warranty. We are all familiar with being offered an extended warranty when we purchase a big-ticket item like a refrigerator or washing machine but now even low-priced items like blenders and toasters offer them.
What is an Extended Warranty?
An extended warranty is a service contract that you purchase that goes into effect after the free manufacturers warranty expires. Most products come with a standard warranty that typically lasts for 1 or 2 years. During that time the manufacturer will replace, repair or service the product, limitations apply, and you should carefully read the warranty information so that you fully understand what is covered.
Extended warranties are not free, you purchase them and agree to the terms and conditions specified in the contract. These may be very different from the manufacturer’s warranty.
Why are They Offered?
They are offered because they are money makers for the company. The retailer makes a lot of money, it is estimated that extended warranties offer much more profit in nearly 90% of cases than that made on the actual sale of the product. That number is tripled for electronics.
They tend to be very restrictive and often don’t cover the most common problems. Read the fine print. They often include many exclusions.
The warranty may require you to use a specific service provider or repair shop for service which may involve transporting the product to a location that isn’t close to you, or it may require that you ship the product and shipping costs may not be included. There is also the risk that the warranty provider could go out of business.
And typically, if a product is going to fail or experience significant malfunctions it happens in the first year. Consumer Reports once said that the cost of a single repair is usually less than the cost of an extended warranty.
Extended warranties are just not worth it.
What are the Alternatives?
Purchase Quality Products
When purchasing expensive items do you research, it is often better to stick with a well-known manufacturer who has maintained a good reputation for their products and customer service. Read reviews on the exact make and model number you are thinking about purchasing. Often you can read Consumer Reports reviews at your local library for free, they offer information on product reliability and ratings. Also consider where you are purchasing the item from, look for a retailer that has excellent customer service and a generous return policy.
Credit Cards
Most major credit card companies offer some type of extended warranty for products purchased with some of their cards. Review your credit card agreement to find out if this is included and what the terms and limitations are. If your card does not offer this and you will be purchasing some more expensive items consider applying for a card that includes extended warranties. Keep the receipt and the original warranty when you make a purchase, you may need them to make a claim on the credit card extended warranty.
Savings Account
Take the money you would have spent on the extended warranty and put it into a savings account, add money to the account once or twice a month. Then if something goes wrong you can put that money toward repair or replacement.
Costco
If you are a Costco member, they include an extended warranty for up to two years for certain items.
Return Policy
Most retailers offer a 30 day or longer return policy, if something goes wrong during that time you can return the item for a refund.
The Tech Minimalist 