Decline those Consumer Service Warranties to Save Money
These days there are more and more companies and sellers offering extended warranties at the point of purchase. Those who market the warranties benefit from the fact that that buyer is forced to make a fast decision – which makes the purchase of an extended warranty an impulse buy. The consumer already has his or her wallet open, so the tendency is to spend a few extra bucks for peace of mind and a guarantee. That makes the business of pushing consumer warranties easy for sellers, and it gives them the added benefit of generating customer goodwill because it appears to be an added layer of customer service.
But unless the consumer gets their money’s worth out of the deal, the only thing the warranties are good for is generating additional profit for the seller. For example, I recently purchased a 30 year old electric piano on eBay. The piano is worth $300 or $400 and the seller offered me an extended warranty for only $17 – which sounded like a good deal considering repairs on these vintage instruments often cost hundreds of dollars. But when I read the small print on the extended warranty I found that nothing is covered if the item was “originally sold more than five years ago.” The piano was originally sold in the 1970s so paying for a warranty would be a total waste of money.
So what about brand new products you buy at a box store? Whether it is a computer, a lawn mower, or a lamp – it will likely be covered by a basic manufacturer’s warranty that lets you return it right away if there is a serious problem. Buying extended warranties on these items is usually not worth the cost, however, because they only cover specific problems under certain narrowly defined conditions.
Another problem with consumer warranties is that they are essentially a form of insurance, but many of these consumer warranty companies are only around for a few years and then they go out of business. So even if you have a valid claim, the extended warranty company may not be around to honor it when you item breaks down.
If the product you’re investing in is so unreliable that you feel the need to have extended consumer warranties then you are better served by just buying a higher quality product. Chances are that no significant repair will be covered by the extended warranty that is not similarly covered by the basic one, and consumer research studies show that extended consumer warranties are typically never used by their buyers. They just add to the basic cost of the product and are, for the most part, not valuable enough to justify the expense.
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