Why You Should Steer Clear of Extended Warranties
In nearly every case, it's not worth the extra money when buying electronics and appliances
If you’re buying electronics or appliances for a family member this holiday season, resist the temptation to spring for an extended warranty in case the item breaks.
Salespeople often push these service plans, which have become a $40 billion business, according to the newsletter Warranty Week. Two-thirds of in-store electronic shoppers and nearly three-quarters of appliance purchasers say that an associate has pitched one to them.
What to Consider
If you still want to purchase an extended warranty, follow these tips.
Understand the manufacturer's warranty before making a purchase. Federal law requires that you have access to the manufacturer's warranty before you decide to buy. When you read it, note how long the warranty lasts (typically 90 days or so), what it covers, and whether the company will repair or replace the item or refund your money.
Some manufacturers will also repair a product after the warranty has ended simply because it’s good customer service, so it’s worth contacting the company should a problem arise. Keep in mind that some extended warranties simply duplicate the coverage already offered by the manufacturer's plan.
Check to see whether you already have extended coverage through a credit card. If you bought the product using a credit card, check to see whether the card issuer extends the warranty. Many do for a period of one year or more. If you’re not sure whether your card provides such a perk, call customer service to find out. Or use an app like Sift, which will let you know before your make a purchase with a specific card how long the warranty will last.
Read the fine print. Extended warranty coverage may not be as comprehensive as you think. Extended warranties often include lots of exclusions that make the service less useful. For example, coverage may not include accidental damage, or companies might be able to deny a claim if you haven’t followed their routine maintenance instructions, according to the Federal Trade Commission.
The warranty may also require you to use a specific service provider or repair shop for service. “You may have to take the product to a location that isn’t convenient, especially if you don’t live in a big city,” says Richard Alderman, director of the Center for Consumer Law at the University of Houston. “You may have to ship it somewhere, even though shipping isn’t included.”
About 1 in 5 consumers who use an extended warranty is dissatisfied with the repair, and service can take a long time or require multiple tries to get it fixed. There’s also the risk that the warranty provider will go out of business.
Consider how much repairs would cost. Extended warranties cost an average of $126 for large appliances and $21 for small appliances. It costs just $26 more to repair the items without a service plan (see Consumer Reports' extended warranties buying guide). While rare, some warranties require you to hit a deductible before they’ll cover your costs or charge fees for each claim.
Repairs, however, aren't usually that expensive. Because the financial risk of needing a repair without an extended warranty is relatively small, it’s not a huge risk to go without one.
Buy higher-quality products. Research the items you’re planning to buy before making the purchase. Be sure to understand the manufacturer’s warranty that comes with it. High-quality items may cost more but they’re less likely to break, making it an easier choice to decline the extended warranty. You can learn more about a product's reliability by reviewing Consumer Reports' ratings and product reliability information online.
Also consider where you plan to purchase the product. Look for a retailer that will take returns on defective items. Stores with the most generous return policies will accept broken items, even years after the original purchase. “Not every company is out to get you,” says Bob Hunter, director of insurance for the Consumer Federation of America.
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