Should You Buy the Extended Warranty?
Many consumers feel conflicted when deciding whether or not to buy the extended warranty. You know the feeling you get when you pick out the new stainless steel, smart refrigerator, justify the $3,000 price tag, and then get to the checkout line to make your purchase?
You’re probably feeling fairly confident in your decision, and you can’t wait to get your new appliance back home. Well, right after the cashier rings up the item, he or she asks you if you want to put down another $500 to receive the extended 5-year or 10-year warranty. Poof; the confidence you had about making your purchase falls away as soon as those words come out of the cashier’s mouth.
The warranty; you hadn’t even thought about the warranty. There you are, standing at the checkout line debating if you want to drop an extra $500 on a warranty that you may not even use. If this sounds like you, hopefully after reading this, you will be more informed about purchasing a warranty in the future.
The Appeal of Warranties
Purchasing an extended warranty possesses several perks that might attract many consumers. The reassurance of knowing that your appliance is covered from any type of issue for the next five to ten years of its life seems very appealing.
Yes, the extended warranty can be very beneficial if your appliance fails. You may think that appliance repairs have seemed to become more common in your home, and you would be correct.
It’s becoming more common for newer appliances to experience more technical failures or need repairs than previous generations of appliances. This is mostly due to the increasing amount of computer board technology in the appliances.
The Underlying Truth of Extended Warranties
Many warranties for big ticket appliances seem logical. In fact, many consumers view the warranty as an act of kindness and customer satisfaction tactic that the company uses; however, this isn’t really the case.
More often than not, the appliance you purchase the warranty for won’t break or need the repairs you think it will. In which case, the money that you spent on the warranty was unnecessary.
When to Buy the Extended Warranty
As a general rule of thumb, you shouldn’t purchase a warranty that costs more than 20% of the item. This percentage helps you realize when a warranty most likely costs more than a typical repair, in which case you shouldn’t waste your money.
You might be inclined to purchase an extended warranty if the company offers one at a significant discount during a sale or promotion. In this case, your $500 warranty might be $250 or even less. In relation to the big ticket purchase, an extra $200 to cover the repairs for another five or so years might make you feel better about your purchase.
Is it Worth It?
More often than not, a warranty doesn’t pay off. You’d have better luck saving the money you would have spent on a warranty by putting it in a savings account.
This way, if the appliance does need a repair, you have the money put away to cover the cost; however, if the appliance doesn’t need the repair, you money is working for you by accruing interest.