Should You Buy an Extended Warranty?
These days, you can purchase an extended warranty for almost anything: flatscreen TVs, laptops, smartphones, appliances, cars — there are an endless assortment of warranties available. Extended warranties are insurance for the product you’re buying, USA Today says. So how do you know when it’s smart to spend a little extra money on one, and when is it just a waste?
Here’s what to consider
Take into consideration the manufacturer’s warranty. They do vary, but most will offer a year on parts and three months on labor, USA Today reprots. As you’ve probably experienced firsthand at some point, retailers will push you to buy an extended service plan. It’s not because they think your product will break, but because it results in them making more money.
Data from Consumer Reports shows that products rarely break within the extended warranty window. And typically, most out-of-pocket repairs don’t cost much more on average than an extended warranty. To avoid purchasing an unnecessary warranty, do your research on the product before you buy. Make sure it’s reliable and has good reviews — it will make you feel better about foregoing the insurance.
Look at costs compared to reliability. Paying for a $100 extended warranty on a $600 laptop doesn’t make much sense, writes Daily Finance. Laptops are typically reliable, and often, consumers will want to swap the old one out with a new one within a few years anyway. If you’re going to purchase a warranty for an electronic gadget, it should cover drops and spills, two of the most common causes of damage.
The bottom line is that if you’re going to buy a warranty, don’t pay more than 20 percent of the purchase price of the product, according to USA Today. And don’t think that negotiating isn’t an option, either. You have every right to try and get a better price on the warranty you’re purchasing. You can also seek out warranty plan providers like SquareTrade and Protect Your Bubble. They’re third-party providers that can usually offer protection at a lower price.
When you shouldn’t buy
If it’s an expensive consumer product such as a refrigerator, washing machine, big-screen TV, or stereo, it’s more than likely going to be reliable and not break down, writes U.S. News & World Report. Often with bigger products, consumers aren’t buying the warranties because they think they’ll break. Rather, they do it because they’ll feel bad if the product does break and they didn’t purchase the warranty.
When you should buy
It’s a good idea to consider an extended warranty when you purchase a previously owned product such as a used car, according to U.S. News & World Report. When you’re purchasing a used item, there is typically an increased risk involved. This is when getting an extended warranty is a smart financial move — there’s a lot better chance a used product will need some type of repair.
A home warranty can also be a smart purchase, “especially if it’s for an older home that has dated appliances. It can also pay to buy extended warranties for specific items added to a home,” per U.S. News & World Report. However, other financial advisers will recommend that you put money in a savings account to pay for repairs. It just depends on your preference.
Other things to keep in mind
Warranties don’t need to be something you quickly commit to when you’re ready to check out. U.S. News & World Report writes that a new car owner can wait just until a warranty expires — at 12,000 miles or two years — before signing up. Another option is ProtectCELL, which sells protection plans for tablets and phones, and which allows new customers to buy a warranty within 30 days to a year of getting their device.