Extended Warranties
Extended warranties, written about in the Wall Street Journal.
Are the extended warranties worth the cost?
Like most insurance policies, extended warranties are a guard against risk. The risk of premature failure/breakdown of whatever product being warranted. As the article mentions, Consumer Reports did a study of extended warranties, concluding, in general that extended warranties were not a good buy. Why? The amount of money saved, on average, was not worth the cost.
The article makes the point that extended warranties offered frequently have a better profit margin built in, then the profit from selling the product in the first place. Making the sales folks push them-I know many of you have sat through those pushy sales presentations-making you feel like a dummy for not buying the warranty.
Many extended warranty offers you get phoned about, at the end of the built in warranty, are offers from third parties, not the original manufacturer-therefore how do you know if they are legitimate-buyer beware!!!
I know my pickup-paid for in cash of course-hit its five year powertrain guarantee a few months ago. I received many un-solicited calls offering a new extended warranty around that time. Since I never took the call, it was just left on voice mail, I don’t know if it was GM making the call, but I suspect it was a third party offer.
The majority of buyers of new cars this year, have actually purchased extended warranties, which I find surprising.
In my medical practice, extended warranties are almost required for expensive equipment. Required because if you don’t buy them, you have to go to the end of the line, so to speak, if the equipment breaks down. They will not guarantee prompt service without them. They have you over the proverbial barrel.
I have made it a practice, however, to ignore extended warranties for purchases made for things around the house. We have purchased a new washer, stove, and electronics in the past year,and have never regretted, so far, not paying for the extended warranty.
If you follow my guidelines on your purchases, making sure you buy quality for a good value, it is unlikely these days for the extended warranty to become necessary.
So what are your thoughts? Let me know if you buy extended warranties and what your outcomes have been.
Tags: buying extended warranties, extended warranty, financial management, should you buy extended warranties
