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Extended
Warranties
Peace
of mind?…and at what price?
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So
you’ve just agreed to buy something after getting the sales
pitch of a lifetime - a pitch that’s convinced you that you’ve
purchased an absolutely great product. Then do you ever wonder
why that’s often followed by the second greatest sales pitch
of a lifetime…that of buying an extended warranty - because
“you just never know when that great product is going to
break down?”
In
fact extended warranties can mean big business for a salesperson
- sometimes netting them as much in commission as the product
itself. It’s good business for them, but is it good business
for you? With an extended warranty you are in effect buying an
insurance policy - and insurance policies are set up not to make
you money, but rather the company offering it (along with the
people who sell it) - meaning of course paying out less than they
take in. Extended warranties are most often peddled on electronics
and appliances.
Is
it worth it? In most cases the answer is “No”. First
of all, most defects will show up in the first year (the standard
manufacturer's warranty period). Secondly, companies other than
the manufacturer usually offer the extended warranties, so if
they go out of business, you could be out of luck. Finally, you
may still get stuck paying shipping if your equipment is sent
away for repair. The bottom line: Generally don't buy them except
in certain cases.
But
if piece of mind is important or if you are buying something you’ll
be putting to extreme use, or if you are buying generally delicate
equipment, you may want to consider an extended warranty. Laptops
or PDA’s and handheld’s, for example, are prime candidates?
However, not all extended warranties are created equal, so consider
the following to give you the best deal:
- Who
pays for the shipping?
Depending on size, weight and where it is going, it could still
cost you plenty to send back. If you are heading back to school
with something you bought locally, it may be tough to find a
service depot without having to ship it back. Look for an extended
warranty that allows you to return it to a nearby store or service
depot.
- Fix
or replace?
Some warranties are more willing to replace, rather than repair
a broken machine than others. A warranty that has a generous
lemon guarantee, whereby they replace a machine repeatedly returned
for the same problem rather than keep trying to fix it, is good.
Some “lemon guarantees” are better than others. Future
Shop’s will replace after 3 service visits, while Office
Depot’s extended warranty will replace most items after
4 visits. If you have an extended warranty it should allow replacement
of your machine with the equivalent newer model should your
present model be discontinued - a great bonus on items with
rapidly changing technology.
- Do
you get a replacement machine in the meantime? If it’s
something like a computer that conks out in the middle of churning
out essays or a PDA during a particularly heavy dating season,
it may be essential that you not have to wait weeks to get yours
back. Some plans replace a product if the repair takes longer
than a certain time (i.e. 30 days). A retailer that has a repair
depot on site will often be your quickest fix option.
- Who
is providing the extended warranty? Is it the manufacturer
or a third party vender? If it is a company or firm you have
never heard of, or that hasn’t been in business for that
long, you may have the added risk of them not lasting as long
as the warranty. It is important to have either the retailer
or the warranty provider will still honor that warranty, if
one or the other goes out of business. (check on Eaton’s
policy)
- Is
the warranty transferable? If you are selling your machine
after a year or two and you have a three year extended warranty,
you’ll likely be able to get a better price if you are
selling it with say a year’s warranty still left. People
are generally less willing to shell out much on electronic equipment
without any form of warranty to back it up.
- Rules,
rules, and more rules! What are the clauses in terms of
what is covered? Some have more clauses than a mall Santa audition!
Keep in mind that most extended warranties still have limits
as to what is covered. That accidental caffeine shower you gave
your laptop or the unintentional laundering of your PDA will
usually not be covered. Keep in mind that having your engineering
wannabe roommate attempt a quick fix on your machine may also
void the warranty. Also ensure that the warranty covers labor
as well as parts (fortunately, most do).
- Decisions,
Decisions: When do you have to decide on the extended warranty?
See if you have a bit of time to decide so that you are not
pressured into purchasing it on the spot. Some merchants will
allow you a few days or even a week to decide. Retailers with
money back return policies (usually 15 or 30 days) such as Future
Shop, will usually allow you to add it within the return policy
time whereas Radio Shack for example, will charge an extra fee
of around $25 to add it later. This is important for example
on Christmas gifts, since you may want to add coverage on the
gift you give or receive, if it wasn’t included at the
time.
- Peace
of mind: at what price? Of course the actual cost of the
extended warranty will play a factor in your decision. We found
significant price differences in the plans we surveyed. For
example on a $375 (approximate price) palm pilot we found the
price for two extra years of coverage ranged from 29.99 to 112.99.
While Office Depot had a full replacement warranty on their
product we found the $112.99 warranty program to be the most
expensive. Thus if you are thinking of purchasing one of these
plans it’s worth comparing the price of the plan as well
as the actual item before you buy. On the above item the prices
were very similar at each store, whereas checking the plans
could have meant a savings of roughly $83.00 plus applicable
taxes.
- Playing
your cards right: the no cost option. While we’re generally
not big fans of credit cards, some cards automatically extend
your warranty. By purchasing the item on the card in full you
may be able to double the warranty period for up to an extra
year. However the drawback to this card feature is that it tends
to be a more complicated and time consuming process to make
a claim. We found for example, that MasterCard’s’
extended warranty plan requires you to fill out and mail back
forms to be approved for the claim. While this may be the cheapest
option, it may not be the most convenient option if it is something
you need fixed right away.
- Hidden
warranties: If you have a product that has been repeatedly
braking down but the warranty has expired, it may still be worth
contacting the manufacturer to see if they will still repair
it for free. Some manufacturers will repair models or items
that have been repeatedly problematic to avoid the bad publicity,
even though the warranty has expired. However it is something
they don’t advertise.
Of
course there is no guarantee that an extended warranty is or isn’t
going to pay off. However consider how you will be using the product
or equipment that you purchase, as well as how well made or fragile
it is. If you have little confidence in how well the product will
hold up, perhaps that brand or model isn’t worth purchasing
in the first place. And of course if you do plan on purchasing
an extended warranty, shop and compare just like you would the
product itself. Some warranty products are good while others may
be worth little more than the paper that they are written on.
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