Extended Warranties: An End to the Discussion?

Here’s a story for everyone to enjoy: back in 2009, I made my first move towards independence and bought my very first car! Not a used car, mind you, but a brand new, right off the lot one that still had that amazing new car smell. I had signed all my papers and thought all the sales pitches were over….until they brought me upstairs to a separate room to talk about what they originally described as financing. Little did I know, it also meant that they were going to be pushing a bunch of added features and extra warranties on me just to make me spend even more money.

Unfortunately, friends, I got roped into buying an extra warranty because I was inexperienced and thought I actually needed it. Almost 3 years down the line and having never experienced a single problem with my car, I now realize that I could have saved a TON of money by just saying no (in my particular case, share your stories below).

Profit, profit, profit
profitExtended warranties are almost pure profit for the companies that are offering them. No matter how sweet the sales pitch might be, and how much it appears to make sense when they explain it, 94% of the time (not a true statistical figure) it’s simply not worth it, and, since we are all trying to save a dollar on everything nowadays, it’s a great way to throw away money. All you have to do is learn how to say no to a sales pitch and to learn how to avoid those pesky extended warranties that just sit and collect dust. Unfortunately, we can’t all offer a reverse extended warranty (as this writer suggests), but I bet most of us would if we could!

Let’s work this out
With this in mind I wanted to put an end to the discussion (that’s the goal anyway, on whether or not you should take that extended warranty. Let’s discuss it in parts. As you might be able to tell, I don’t particularly agree with them personally, but I have done my best to show a balanced side for people who want to make an educated decision and to facilitate discussion.

Crying reps

~ Don’t worry, we feel the same!

As always, do your homework!
do your homeworkBefore venturing into any big ticket purchase, make sure to research everything you possibly can on it; from complaints, to praises, to failure rates, to price ranges and everything in-between. Most, if not all companies nowadays offer a basic warranty on items that can range anywhere from 3 months to 1 year when it comes to electronics, and basic warranties on cars are usually around the 36-months/36,000mile mark (unless you bought a new Hyundai or a new Honda which offers a ridiculous 5year/100,000mile plan!). As you research, check what the basic warranty covers, because most of the time, that’s all you need. If you’re purchasing using a credit card, check with them as well (for example visaperks.ca for people using a visa card in Canada), because some credit card companies double the basic warranty (or other cool free features) when you buy an item using your card.

What’s the failure rate?
Another important issue you should check is the failure rate on items and how much it would cost to repair it sans the warranty. At one point (and they still might be), Future shop was offering an extended warranty on Xbox360 controllers, and the price of the warranty was almost half of the cost of the controller itself. In all honestly, with the exception of the few gamers who get frustrated and launch their controller across the room, I have NEVER heard of problems occurring with any sort of video game controller. On that note, with the exception of the red ring crisis for Xbox, I don’t think I’ve heard of any major problems occurring with any gaming system (granted, I could be wrong! I like to think I’m a huge gamer, but I’m unfortunately not perfect ~ update from Stephen; he said he has had 2 PS3’s die on him). Unless you have the worst luck in the world, there is no valid reason to purchase an extended warranty on most items (please see the notes at the end where I list some exceptions).

Warranty Overlap
Something I learned during my research was a new term for me called ‘warranty overlap’ (i.e. Say your manufacturers warranty on an item you just bought is for 1 year and your extended warranty you were mini-forced to buy is for 3 years. Sometimes, just sometimes, these will overlap, so that in total you will only have 3 years, rather than the 4 you thought). Please check this (not verbally) if you decide to get the warranty.

The warranty covers what you say?
People often assume that extended warranties cover everything, including accidental damage, power surges, a dunk in the bath, scratches and damage to the sockets (from stuff like accessories being pulled out to forcibly). Well, I very much doubt they will cover the entire list, especially things like power surges, these are often classed as ‘act of god’ and are not covered under most warranties. If you do decide to take a warranty, please, for the love of unicorns, find out what it covers before committing. Because it will likely not cover anything you might actually need it for.

Warranties are like insurance
Think of it like insurance. The store you are about to purchase it from has already done the math and found the product’s ‘failure-rate’ (they definitely know this, in case you were thinking that they didn’t) and the cost of common repairs and the they do the calculation to set the price of the extended warranty so they make a profit. And if warranties are anything like trying to claim on insurance, they will sure make it difficult to claim.

Learning to say no!

crazy sales personSales associates not only get commission on the items you buy, but they get an additional commission on the warranty you buy as well. That pesky salesperson that talks the biggest talk and is trying to convince you to buy the big warranty ‘just in case’ is not trying to look out for you, but is trying to get a bigger commission. I hate the way they make you feel like you just stepped on the very last unicorn in the world when you say “no thanks”.

Try telling them right off the bat that you’re not interested in an extended warranty and that you don’t want to hear about it. If they push it further, threaten just to walk out and to not buy anything and you’ll see how fast they change their tune. For example, in my lazy attempt to work out, I bought a Kinect for my Xbox360 from Futureshop a few months ago. I made it very clear to the sales associate that I wasn’t interested in the warranty and that I just wanted the item. He started with a bunch of “what ifs” and I firmly told him that I had no interest in it. Then, as I was about to pay, he started to go on about it again, so I threatened to walk out and leave if he breathed another word of it. Needless to say, he stopped and I walked out with a new toy that has yet to have a problem!

The key is to be firm and not waver and to stick to your guns. The same logic applies to those added features when you’re buying a car. They are in the business to squeeze money from you and to earn a bigger commission check at the end of the day. Do you really need life insurance from a dealership? Personally, I don’t think so.

There are exceptions!
do your homeworkOne of the only products that I will buy an extended warranty on (and recommend to do) is when it comes to a computer, either desktop or a laptop. My local Futureshop repairs them in-store and with the extended warranty I don’t have to pay a dime. Granted, every store is different, but I’ve never had a problem with their repairs and they will even take the time out to explain everything to a computer dunce like me. Unless you’re a computer wizard or have one stashed away somewhere, it’s a good investment to look into. But again, this also depends on the brand, if you are going the cheap route (like an ACER or a HP) then you may want to consider an extended warranty. If you are getting an up-market computer like and Apple I personally would forgo the extended warranty as they have a great reliability rating.

I like what The Grouse said (by Tom Conlon); “Every time I’ve needed a gadget repaired, it’s always cost me less than the bloated price of an extended warranty” ~ source

A Tip
This was news to me, before researching for this article anyway. Most stores (especially electronic ones) offer customers a grace period to consider an extended warranty. So if the quality of the product you recently bought feels a bit ‘lacking’ when you get it home and you feel like it may break before it’s natural life-span then check with the store you bought it from and see if they will let you buy an extended warranty. For example, Apple give you 1 whole year to think about extending your warranty after you purchase one of their products.

When you may want to ‘invest’ in a warranty
Like with the mention of insurance earlier, only purchase the warranty to cover what you can’t afford to replace (i.e no need to purchase it on batteries and the like ~ Stephen was literally asked this by a smiling employee at The Source the other day) like airplanes, cars and maybe an awesome TV. Also, if you need an item for your job, it might be a good idea to look into it. For example, if you’re a photographer and your camera breaks, can you really afford to shell out for another one? The same logic applies to cell phones and computers; if it’s your livelihood and the warranty isn’t too ridiculously over-priced, it might be a good investment.

Even better. Buy from stores that have awesome warranty policies. Take Costco for example. Apparently I heard they automatically extend the manufacturer’s warranty to two years for free! (Hurray for Costco ~ I never thought I would say that)

Unfortunately, I have boring stories when it comes to my own personal experience with extended warranties, but I adore hearing your feedback! Leave me a comment below with your experiences!

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