Many conscientious consumers go the extra mile when they shop for household appliances – like DVD players or dishwashers or microwaves – and purchase an extended warranty. They want to be satisfied in the knowledge that their new appliance won’t cost them money down the road, that if it breaks down after the limited warranty expires, they’re still covered. This may seem like sound thinking, but are extended warranties a good idea after all? The New York Times, the LA Times, and a slew of consumer report magazines and websites don’t think so.
There might be cases were an extended warranty is reasonably priced and makes up for a limited warranty that covers little ground or has a short window of time, and thus, is worth it. But too often, they are a waste of money. This seems counter-intuitive. Why would a warranty not come in handy? Before you buy an extended warranty, ask yourself the following questions: what are the odds that this appliance will break down in X amount of years, and what will the price of a replacement or repairs to this appliance be in X amount of years? People often forget that while their product may indeed malfunction later on, the price of the product will also decrease later on. Only when the predicted cost of replacement or repairs will be significantly greater than the current cost of the extended warranty, should one consider buying the extended warranty. And still, a warranty should only be considered if there is also a significant chance that the appliance will break down in the first place!
You may think that buying an extended warranty is the smart, financially sound thing to do. But once you do the math and think outside the box, you may never buy an extended warranty again. Of course warranties are important and you should always make sure that when you buy expensive, important appliances – like a clothes dryer for instance – that it has a warranty to go along with it. But if a salesperson is trying to get you to buy an additional extended warranty, be skeptical.
Think about sales and advertising. There is always a profit motive and retailers and merchandisers can often make more money off of consumers when they buy extended warranties than when they buy replacement products or pay for repairs! This is why retail stores and third-party companies offer extended warranties, not the manufacturers themselves. Especially in the latter part of the 21st century, where technology exponentially improves from day to day, inflation runs ramped! A computer today costs a lot less than it did just a year ago. But it’s not only inflation you should think about. Maybe you will in fact, use your extended warranty for a small repair. But oftentimes, the cost of that repair is the exact same price of the warranty that you originally purchased. And seeing as how that repair was certainly not inevitable, and in fact may have even been unlikely, it seems silly to shell out dough unnecessarily.
Extended warranties can cost hundreds of dollars and if your DVD player is well-built and the same manufacturer will produce more DVD players at a lesser price later down the road, is there really much reason to buy that extended warranty? 90% of the time, extended warranties are never used and even when they are, the cost of replacement or repairs probably was not that different than the cost of the warranty.
There is still a time and a place to buy an extended warranty. Having the peace of mind that your appliance can be fixed and/or replaced at no charge, even after the time period listed in the limited warranty, can be worth a lot of money. As well, if the limited warranty is less-than-desirable, you will definitely want to consider investing in an extended warranty. Just make sure that what it covers and its time span is worth the price. Many extended warranties have fine print that’s easy to overlook but could really surprise you, and not in a good way, if you ever end up trying to take advantage of them. For example, maybe a certain kind of repair isn’t covered under the extended warranty like you thought it would be.
The moral of the story is that you should do a little math and critical thinking before you buy an extended warranty. Maybe it will be a wise purchase, but maybe the money will be better spent toward other products or services or simply put right back into your pocket or your bank account.