It seems almost everything comes with an optional extended warranty these days. From electronics and exercise equipment to cars and home appliances, with nearly every purchase comes a sales pitch for the notorious extended warranty.
Sales people largely use fear tactics to scare people and ensure that they buy on emotion, not on rational logic. Consumers beware, with every positive side to extended warranties there is almost always a negative. In most cases, what seems like deal is actually a steal. Consumer watch groups have grown both wary and weary of the long list of optional warranties that come attached to any purchase. Not much different than auto insurance, stores are raking in big bucks by selling warranties. To buy or not to buy, here are some extended warranty pros and cons.
Why Extended Warranties are a Waste of Money
These are the most important points to consider before the Best Buy sales rep tries to convince you that it’s worth it.
Limitations and The Fine Print
With every extended warranty contract there is always a long list of exceptions that can frustrate you when you discover that your purchase is the one that’s on the list. Many buyers have called foul when they don’t qualify for a replacement or repair due to some unforeseen contractual clause. It was obviously there all along but often it’s neatly tucked away in the fine print and legal speak that even the sales reps probably don’t understand.
You Can Get a Better One, Cheaper
If you are looking to buy an extended warranty for a TV, laptop computer, digital camera, appliance or other higher price tag item, keep this very important point in mind: These days, most of this technology is well built. Just like anything else, it will break if mishandled or given time. Now consider the cost. The price of technology goes down continually. You may buy the latest TV for $1,500 and pay $300 for a 3-year extended warranty. If the TV breaks, you can take advantage of that. But, what do you think the same TV will cost 3 years from the time of purchase? A lot less. You could avoid the extended warranty and just buy a better TV for less in 3 years.
Additional Costs
Consumer watch groups warn that forking over that extra wad of cash is an unnecessary cost as, chances are, if the product is a dud it will reveal its causality early on and fall under the pre-existing manufacturer’s warranty. Store owners wouldn’t be gambling with insurance if the odds weren’t in their favor.
Losing the Bills
While some people stash their instruction manual and extended warranty in a drawer and forget about it, others have files bursting with paperwork. Either way, with contracts running from one year to 10, there is a lot of time to lose the contract. Warranties often demand the shopper show proof of purchase of both the insurance and the product.
The Benefits of Extended Warranty
Product or Service Protection
With mass-producing assembly lines dominating today’s global market, there is no doubt a bad item will turn up in every batch. Be it an iPod or a Mercedez, people buy lemons every single day and there is no doubt that warranties protect against the chance of a dud. (Although, on the other hand, companies should guarantee products to a far extent, even without an extended warranty).
A Sense of Security
There is nothing more unnerving than unloading hundreds, sometimes thousands, of hard-earned dollars for a high-definition television or new dishwasher. Tacking a comparably cheap extended warranty onto the new purchase can calm those jangled nerves and ease purchase anxiety. (This anxiety and fear is the sales person’s best friend as they scare you into it).
Potential upgrade.
With electronics and home appliances constantly in a state of evolution, one product is hot one day and replaced by an even hotter upgrade the next. Some smart shoppers buy into a warranty and, toward the end of their contract, will claim catastrophe and exchange their three-year-old device for an upgraded version. When the contract promises a swap and the store is stocked only with the newest version, consumers sometimes get an upgrade.
Re-sale Value
When I got a flat screen TV for my birthday, I sold my Sony Trinitron on Craigslist. I was able to get a fair price for it because I still had 2 years left on the extended warranty which was an appealing bonus compared to the other TVs being sold which people could never be sure would be trustworthy.
The Reality
Don’t listen to anything the sales rep says. I used to buy extended warranties on my electronics and computer equipment. On several occassions I was lied to and when the item broke, I got stiffed. Here are some real life examples that you may relate to:
- On one occassion, I paid extra for in-home TV repair service. When it broke, they told me I had to bring the TV to their repair center (a 30 minute drive) or they wouldn’t service it. They also refused to drop it off and so I had to go back to pick it up.
- On another occassion, a sales rep told me that even if my TV got knocked over by accident and broke they would repair or replace it. After the purchase, I called 2 other stores and both denied that the warranty covers accidents.
- The time when I got a TV for my birthday, I choose a Sony TV that had just come out that week. The sales rep kept insisting that it would break after around three years and so it was worth it to buy a 4-year extended warranty. When I asked him how he knew that, given that it was a brand new model, he just kept insisting it was going to break and that I needed the extra coverage. Total nonsense.
- I went to buy a laptop (again at a big box store…) and the sales guy kept insisting that if I did something as trivial as pop a keyboard letter button off or gently unscrew the screen so as to make it unreadable, even by one pixel, I would “easily” get a new laptop. I asked around and just about everyone told me it was actually quite difficult to get them to replace laptops for those types of issues. I was also told that if there appears to be any sort of tampering with the item, as indicated by scratches on the screen or paint removal on the screws, they would not honor the warranty. Sadly, he also gave me some story about how he personally got upgraded and how easy it was. Yeah, right.
In the end, extended warranties may be worth it in some cases but probably not under most circumstances.
RSS