This article was last updated on December 27
If you’ve bought an appliance or electronic gadget in the last few years, the sales person has probably tried to sell you an extended warranty or insurance plan. Often they justify it as a relatively small purchase, and isn’t the peace of mind worth? Unfortunately, many of us are sucked in and end up buying the unnecessary and over-priced extended warranty, without ever using it. The merchant/retailer are the ones who really gain because they end up making a lot from the commission on selling you the warranty and take on no risk if the product doesn’t work (the manufacturer generally bears that). In fact given the extremely competitive electronics market, in some cases, retailers make more of a profit selling the warranty than they do selling the actual appliance or gadget!
What’s worse is that you may have to jump through hoops to actually take advantage of the warranty. For example, most extended warranties require you to mail or take the gadget/appliance to a specific repairer (and not the store you bought it from) and in many cases only refund you the “current” cost of the product – rather than when you bought it. Which in the world of electronics and gadgets could mean a significant drop in just a few months. I firmly believe that additional or extended warranties for most electronic and small appliances are a waste of money and basically overpriced insurance. In the long run, you’ll do better taking on the risks of product damage myself. What’s more is that with a number of credit cards you actually automatically get an extended warranty by buying the product on their card. So in addition to a standard 1 yr warranty or buyer protection on most electronic items, you can get an extra one for free. This is a feature that most folks don’t realize and so fail to take advantage of.
Now, there are some cases when an extended warranty may be worth it. After all getting a warranty is like buying insurance and you should get it if the potential loss from a defective item would be severe. Here’s the rule I would use for when to determine if I should buy an extended warranty: If the cost of replacing the item is very expensive and vital to your family or work/business, you should cough up the cash for the extended warranty. For example, if you’re starting your own business and buy a $5,000 server or specialized equipment that your business cannot run without, you should cough up the cash for the extended warranty. Also, I would read the warranty terms very, very carefully, especially the process and time frame to inspect and replace defective goods.
But, if someone tries to sell you an extended warranty for a consumer discretionary item like a Laptop, Netbook or iPad, you shouldn’t buy it: It’s a risk you can afford to take and most of the time you’ll come out ahead by not buying the warranty. Besides most discretionary gadgets and appliances nowadays come with a standard manufacture warranty (1 year in most cases) and are not that expensive to replace, so buying an extended warranty is simply not worth it.
So don’t caught up in the should I or shouldn’t I debate over getting an extended warranty. Simply put, If you can afford the risk of having to buy a new one, skip the warranty. If you can’t, buy it.
~ Saving Money on Calling Costs Via VOIP Phones
~ $300M Cash for Appliances Stimulus Rebate Program Covering Air Conditioners to Refrigerators to Washers
~ New 2010 Entertainment Book Review – Up to $20,000 in savings for Less Than $30
~ Why I hate shopping at Walmart
~ Five Things To Look For in Getting Low-Cost Auto Insurance Rates
~ Buy Now versus Interest Free or Pay Later (Deferred) Plans