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Why you should never buy the Extended Warranty

5:27 PM, August 11th, 2010

It seems these days, you can't escape being offered an "Extended Warranty" or "Service Plan" when you buy something. Computers, electronics, even home appliances, everyone wants to shake you down for an extra 10-20% of the purchase price. Here's why you should say NO!


  • Most products already come with a one-year warranty from the manufacturer.

    Modern electronics are usually out of date after a year, so even in the unlikely event that it was to break after this initial period, it probably wouldn't be too horrible to have to buy a new one.


  • You can get the same benefit with a Gold Card

    If you use a "gold" credit card (or better), they usually have an automatic purchase protection plan that doubles the original manufacturer warranty. You can get one of these cards from your bank, usually with no fee. Check your cardholder agreement.


  • The Extended Warranty usually doesn't even start until after the manufacturer's one has expired

    This means if the device breaks within the first year, you have to go to the manufacturer, just like you would have had to without the extended warranty.


  • The Extended Warranty agreement is full of exclusions and odd rules

    You usually don't get the chance to go over the fine print when the cashier asks you to sign up for the warranty. There's a good reason for that: The agreements usually contain big lists of excuses and exclusions, allowing the store to deny coverage for most cases of damage.


  • The salesperson makes a commission from the warranty

    He may seem like a nice guy, looking out for your interests, but he makes a fat commission off of selling you that warranty. That's why they push it so hard.


Extended Warranties are a bad deal all around. With a little bit of math, I can prove to you that they're not needed. Take this example:

Over the course of several months, you buy 10 devices at an average price of $100. For each device, you choose to pay for the $15 extended warranty. So now you've spent $1,000 on devices, and $150 on warranties.

A year later, one of the devices fails. It's now past the original manufacturer warranty. If you're lucky, the extended warranty you bought will cover the failure and repair the device. "Wow," you say, "That $15 warranty just saved me a hundred bucks!"

Except it didn't, not really.
  • You still spent a combined $135 on other warranties you didn't use
  • If you hadn't bought the warranties at all, you'd have an extra $150 in your pocket. Now, you use $100 to replace the failed device, leaving you $50 in the black!
  • Chances are that the same device now costs less, or a newer, better one is available for the same price.


I hope you choose never to buy another extended warranty again!

Comments

Diana 3:24 PM, September 11th, 2010

Absolutely true, I never purchase those a waste of money for sure!
peace my friend

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