2/25/2018

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Extended Warranty

When you buy a product, regardless to how much it costs, you should expect to get your money's worth out of it. It should last a long time before breaking down.

An extended warranty, called a service contract, is a warranty package offered to consumers as extended protection, for a longer time period, against malfunctions or the total breakdown of electrical or mechanical equipment after the original warranty runs out. In essence, it works like an insurance contract for future repairs that go beyond the number of years guaranteed on the product when first purchased.

Retailers and manufacturers offer extended warranty plans on such items as refrigerators, freezers, microwave ovens, stoves, washers and dryers, television sets, digital cameras, power tools, computers systems, game machines, copy and fax machines, and many other products.

Auto companies offer extended warranties on cars to cover mechanical breakdowns beyond the original warranty. The extended warranty often covers different areas of the car, such as the engine, transmission, electrical, and heating and cooling systems.

An extended warranty is often offered as extra protection by the retailer and seen as a security blanket by the customer. The customer may decide that it is better to buy the extra coverage on his purchase just in case something does happen later. In such a case, the costs to repair or replace the item won't have to be paid for with out of pocket funds.

Are extended warranties worth the cost or even necessary? It depends on the customer. Without a doubt, buying certain extended warranties may not be a good idea. But there is always the possibility of something breaking down as soon as the manufacturers warranty runs out.

  • It is easy to convince some people that long term peace of mind is worth the additional costs.
  • Extended warranties can become very expensive and you may never use them.

There are different schools of thought on extended warranties. Some experts believe that they are not worth the cost. They say that in most cases, by the time the original warranty expires, most consumers are already geared up for an upgrade. This means that the customer will purchase another product and never use the extended warranty.

Some experts say that it is wiser to put the money in an interest bearing account or some other investment vehicle and make additional income on your money while it just sits there. As stated above, you may never use your extended warranty anyway.

In most cases, retailers and manufacturers calculate the odds of most consumers actually using an extended warranty as very negligible. This works in the retailers favor and they make billions of dollars by promoting extended warranty policies. The retailers and manufacturers don't provide repair services on many of the contracts they write. The warranties simply expire. Companies actively promote the sale of extended warranties because of the profit margin.

If you decide to buy an extended warranty on any product, it is important to read and understand the terms and conditions of the contract and to make sure that it works in your favor. You must remember that extended warranties are calculated to be profitable to the companies that provide them, not to you. Your appliances, in most cases, will outlast the warranties you purchase.

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