I’ve Always Wanted To Know:
Extended Warranties: Deal Deal or Waste of Money?
Have you ever been in a retailer and after picking out the item you want to buy you hear the following line: “Did you want to go with the extended warranty?” Everything from a $10 calculator to a $3,000 ride on lawn mower seems to have an extended warranty offered for sale with it. Should you buy one if it’s offered? Some people swear it’s the best deal while others claim they are totally worthless, so what’s the truth?
The truth is it depends on the details of the plan and what you’re buying. It’s critical to look at the written terms of the warranty and know what you’re buying. Even though some salesmen may be honest, it’s never a good idea to take them at their word as there is often a bonus or commission paid for extended warranty. Policies can change with management changes as well so if you don’t have it in writing don’t expect it to be honored.
What questions should you ask when considering an extended warranty?
Length of coverage and how the plan is serviced: Does the coverage begin at the end of the manufacturers warranty? Does it run along with the manufacturers warranty? Is the service done by the local store? If not do you have to pay to ship the item in for warranty work? Look for warranties which being at the end of the manufacturers warranty and are serviced by the local store or include free shipping to the repair center or in-home service.
Type of Coverage: Does it cover manufacturing defects alone or does it cover all types of damage including accidental/abuse. Does the plan offer replacement? Repair? Original sale price store credit? Pro-rated store credit? Look for a plan that covers all types of damages without exclusions and offers either a replacement for identical model or original sale price store credit. If you see the term pro-rated then it’s probably not worth it because you’ll only receive a portion of the value based on how far into the warranty period you are.
Cost of the plan: Most good warranty plans won’t exceed 10 to 20 percent of the total sale price. Don’t purchase a warranty if the price is excessively high in relation to the cost of the item.
Deductible or limitations of coverage: Does the plan have a deductible you have to pay first before the plan kicks in or a limit the number or cost of the coverage. Look for a plan that has no deductible and has no limit to the covered amount of repairs.
Chance of using the service plan: This may be the hardest one to evaluate but it’s often the most important. If you’re buying a new tablet which you intend to transport with you the chances of you dropping it are comparatively high to if your buying one to sit on the coffee table to read on the couch. Peace of mind is of different value to everyone so if you want to buy that peace of mind know that your purchasing that primarily and be content with having it. If you’re buying the plan to cover replacement parts for a mower be aware of the costs and evaluate if it’s a wise investment.
P.S. You can buy third party extended coverage for most electronics through SquareTrade. The warranties are very well reviewed (and often cheaper then the store extended warranties) and can be purchased within 30 days of buying a new piece of electronics by going to http://www.squaretrade.com/