Great Savings 55 – Save On Extended Warranties

 

I just bought a new stove.

When does it make sense to buy an extended warranty? Check out the guidelines below.

An extended warranty is basically a special type of insurance policy to help defray your costs should something you buy need an unexpected repair and it’s no long covered by the products regular warranty. Most often you won’t learn the cost for this policy until you’re at the checkout counter and under the gun to make a decision. At this point you’ve already committed to buy the product so pushing this extra cost on you is easier for the store. But how do you know if you’re really getting your money’s worth? Follow these simple guidelines for some peace of mind…

 

A Good or Bad Bet?

 

Some people are convinced that extended warranties never pay off. They see them as a bet—one with the odds stacked heavily on the side of the house. In other words, they view extended warranties as a big loser. They have a point: Stores are in the business to make profit so they aren’t about to sell coverage that won’t leave them ahead in the process. To these stores it’s all a numbers game. Sure they will take a loss on some customers, but the idea is sell more insurance than they have claims.

 

 

Does this mean buying an extended warranty is a bad idea every time? Of course not. Whenever you own a product that fails and the warranty is up, having that extra coverage could save you a bundle or even provide a brand new replacement. Still, it pays to consider your options and that’s why we’ve come up with the following 7 guidelines to help you decide whether buying extended coverage is a good idea.

 

Chicka wants to know how to increase profits.

Let’s face it: Companies are in business to make profits. Without it they can’t continue their operations.

 

The 7 Rules:

 

(1) Factor in the price. Think about the price of the item you’re buying.  If the item you purchase costs $10,000, paying a few hundred dollars for a “service contract” to fix it when it doesn’t work might help you sleep better at night. It’s hard to put a value on that. Then again, if the item costs $10 and the warranty costs $3, it’s probably a loser—you might do better to throw it away and skip the hassle of getting it fixed.

 

This is Great Savings Tip number 55 - Save On Extended Warranties.(2) Ask for the cost of the extended warranty before you commit to buy. Don’t wait until the last minute to find out the cost. Ask up front and include the cost with your overall price. That way you can decide how important the extra coverage is to you and you can determine whether you’ll stay on budget when you buy it.

 

I hope my car isn't a lemon.

Most car dealers will be selling you on their extended warranty as soon as they have you hooked on the car.

(3) Find out who does the warranty repair work. This should be part of your upfront research. Often the warranty work on a product you buy is handled by a third party. That means your repair may be dependent on the skills of a subcontractor you wouldn’t hire if you were going to pay to fix it yourself. If you know who this is ahead of time you can check their reputation online. Watch out for companies without adequate personnel who may schedule your repair days or even weeks after your item stops working.

 

(3) Find out what the extended warranty actually covers. Sometimes the fine print on an extended warranty is a far cry from the salesman’s promises. For example, you may get repairs at first, but if you have several claims and exceed the original cost of the item, then future repairs will be denied. Again, the more you know up front the better you’ll be able to sleep at night.

 

(5) Consider the length of an extended warranty. If you buy, say, a car or other large ticket item you might want multi-year coverage. However, be aware there’s always a risk the company underwriting the extended warranty may go out of business and you’ll be left with the bill. It should go without saying that the longer the warranty, the more risk of this happening. Find out who is underwriting the warranty. If the company is already on shaky ground, you may not end up getting what you pay for.

 

JB is quite a duck. Follow all his adventures in the Adventures of Javabird.

JB did his homework before going to buy.

 

 

(6) Research the product you buy first. You can save a world of hurt buying a reliable product to begin with. Take the time to research it. Companies like Consumer Reports make it their business to offer research for a fee, but there are also free alternatives. Check and see if the product you want is sold on a major website like Amazon.com and check the user reviews. The more reviews and the higher the rating the better chance you’ll end up with something you can count on. Good companies spend a lot of money building a reputation of quality. Seek them out in the first place and you’ll experience fewer problems, warranty or not.

 

Dusty didn't come with a warranty.

Dusty adds, “Be ready to growl when you hit the check out counter. Most sales clerks are trained to offer extended coverage and a good growl warns them off.”

(7) Factor in your time. For some, calling around to figure out how to get warranty service, waiting on hold, filling out forms, waiting for a technician to show up, or having to send something off in the mail just isn’t worth it. Don’t forget the value of your time in the overall equation. If you’re retired or work from home, hanging around for a technician may be no big deal. If you hold a job in a high stress work environment, the extra cost of lost productivity may make buying a new replacement a better deal than hassling with a warranty.

 

Bottom line: Do your homework before you buy. You could save thousands over the long run.

 

Action Item: Think of a product you want to buy. Have you done your homework? Look the product up on Consumer Reports, Good Housekeeping, or a company that allows its customers to review purchases like Amazon.com or Costco. Also, find out how much an extended coverage warranty costs, who performs the service, and how long the coverage lasts.

 

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