Sometimes it’s pretty difficult to part with our hard-earned money for replacement appliances and electronics. We look for sales and discount notices and hope one comes along in time. When we find the item we want at a price we can afford, we jump all over the chance before the price changes. We really want to protect our investment, so what do we do? We buy the extended warranty or the service agreement to give us some peace of mind—and boost the retailer’s profit margin as we waste our money more often than not.
Is That Extended Warranty Worthwhile?
Extended warranties are rarely needed, especially if the buyer properly researches product reliability before purchase. If a product is well-made, you’ll usually receive reasonable product life, so purchasing extended warranties and service agreements profit the retailer—not you.
Part of your pre-purchase research is determining if something goes wrong, how much it will cost you to have it repaired after the normal warranty period. Check not only authorized service centers but also local appliance and electronic repair businesses: You will get charged more for an after-warranty repair by a service center than you will a reputable “handy man” business—but make sure the product is out of warranty.
Note the terms of the warranty extension or service agreement: If you pay a recurring fee, usually per year, you usually start paying immediately, which means you’re paying for service during the warranty period. If you pay a flat fee for a number of years, make sure the time period starts after the warranty.
Most extended warranty or service plans range from 5 to 20 percent. If the retailer is charging more than 20 percent of the purchase price, you are overpaying, and that 20 percent is both the total over the life of the plan and, according to some experts, extremely high.
Make sure that the fees you pay are less than the average cost of repair for prevalent problems with your equipment. If the repair costs more than the total you pay for the extension or agreement, the retailer’s extension might be worth it.
Note service locations: If you have to ship the item, include that cost in your expense comparison.
Know how long your equipment lasts according to your use patterns. If you move a lot or use the appliance considerably more often than average, that elevated use might contribute for early parts demise. In those instances, you might consider the extra plan, so long as the above conditions on affordability apply.
Know any exclusions to a potential extended service plan. If common breakages are not covered under the extended plan, you’re wasting your money.
Know whether a credit card extends the manufacturer’s warranty if you use that card for purchase. Many card user agreements include that benefit, and you’d find that information in the fine print. If you can’t find your card’s user agreement, contact the card issuer’s Customer Service department. The representative will gladly review the agreement with you, answer your questions and often arrange to send you another copy for your records.
Only when you are not duplicating services and expenses and only when it’s truly affordable and reasonable, should you entertain the idea of purchasing an extended warranty or service agreement.
Author Bio: This post was contributed by John Walker from payday-loans.co.uk. John lives in London, UK where he works as a financial analyst.
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