Reading Time: 3-4 Minutes

Before taking the plunge and getting that extended warranty coverage read this post on extended warranties.  Make sure you get the protection you pay for.

Extended Warranty Coverage | Extended Warranties

Big Bucks for Retailers

Did you know that retailers sometimes make more money from their extended warranty coverage profits than they do on the appliances and major electronics they sell?  This is why salespeople consistently pitch extended warranties as strong as the product they sell.  According to the Service Contract Industry Council you will pay around 10-20% more for a product (on average) when you extend a 1-5 year manufacturer warranty.  The retailers simply sell off your contract to a third-party warranty administrator.  They pay them around half of what you paid for the warranty extension. This arbitrage technique is an easy money maker for retailers.

Usually Don’t Need It

According to Consumer Reports, most major appliances and electronics don’t break down within the extended-warranty period.  They also claim that when the devices break down the repair costs usually equal the cost of electronics extended warranties.  However, there are exceptions.  The exceptions include: electric wall ovens, dishwashers, and refrigerators with ice-makers.

Extended Warranty Coverage | Extended Warranties

Sure You Aren’t Covered?

When you pay with a credit card you may already be covered.  Most Visa Signature and Mastercard credit cards double the product warranty!  If you pay with American Express you get up to a one year extension of the manufacturer’s warranty.  Companies like Costco extend manufacturer warranties too.  If you purchase TVs, computers, or projectors from them you’ll get protection two years from the purchase date.  You’ll want to make sure to check with the manufacturer also.  Sometimes, the problem you are having is a reported issue that hasn’t made it to the complete recall level.  The manufacturer often fixes the issue or fixes the problem at a discount.  For example, my buddy owns a Lexus.  This Lexus had a specific problem that occurred on a small sample set of his model vehicle.  So, it was cheaper for Lexus to fix the problem at no cost to him.

Consider a Local Warranty

Let’s face it.  Most third-party extended warranty companies just don’t handle their business.  Yes, buying a warranty extension usually gets you in front of other folks without one.  However, it is usually a better idea to buy local and get an extended warranty from the local shop.  Most local shops with a service department sell their own warranties. When you buy from them they service the product.  You typically get quicker response from a local service provider.  These folks have access to the repair knowledge, the parts, and usually get the job done fast.  Most of the time, you don’t have to deal with all the crazy paperwork or the slow-pay of a third-party administrator.

Read the Fine Print

Yes, it is cliché.  However, before you consider buying an extended warranty make sure you ask a few questions.  Who will provide the service?  Any deductibles?  Service call limits?  Any cancellation triggers? Any coverage exclusions?  Will they replace an item if it can’t be repaired?  Then, if you can live with the conditions then do some online research.  A simple search online will give you an idea of a company’s credibility and service times.  Check out Angie’s List too.

Extended Warranty Coverage | Extended Warranties

Dump the Warranty
Most states require a 30-day “free look” of an extended warranty (some even provide up to 90 days). If you buy an extended coverage warranty the companies must allow you to cancel and give you all of your money back.  If you go beyond that date you can still cancel.  You usually get a prorated refund and the administrator usually charges a cancellation fee. Check out your local consumer protection department to find out more about state law pertaining to extended warranties.