Mrs. Hein
11-14-2005, 03:29 PM
I thought this was an interesting article from Monday's Sun-Sentinel, especially with the holidays coming on us. Many people do not get the extended warranties for the reasons listed below, but a few may be scared into it by the sales pitch. Buyer beware...
http://www.sun-sentinel.com/business/sfl-ybwarranties14nov14,0,5358142.story?coll=sfl-yourmoney
Just say no to those sales pitches for most extended warranties
By Gregory Karp
KRT
November 14, 2005
It has become routine to step up to the cash register and listen to the obligatory pitch for an extended warranty on a host of purchases from electronics to appliances to eyeglasses.
You know it's coming and you brace for it. And sometimes you say yes.
That's a mistake.
At best, extended warranties are a type of insurance that usually turns out to be a waste of money. At worst, the add-on warranties are cold-hearted ripoffs that play on the fears of consumers during a vulnerable moment.
"Generally, they're not worth it," said Mark Kotkin, associate director of survey research for Consumer Reports, which regularly advises consumers against buying extended warranties.
This holiday-buying season, it might sound like a good idea to plunk down $40 on a three-year warranty to safeguard that $300 electronic gadget. But that's akin to paying nearly $27,000 to insure a $200,000 home for three years. Clearly, nobody would do that.
Extended warranties usually kick in after the manufacturer's warranty expires. Some even overlap.
In nearly every case, extended warranties are a great deal for the salesperson, who receives a fat commission. And they're a bad deal for you because you're unlikely to use the warranty and you're vastly overpaying for protection.
But some consumers are vulnerable during that moment when the warranty is offered, sometimes with a hard-sell pitch. The salesperson asks and waits, wanting an immediate answer to a question many consumers forget to think about ahead of time.
To avoid a mistake in that moment of uncertainty, there's a rule of thumb: Just say no.
Here's why:
>You don't insure little things.
The basic spending-smart rule of insurance and warranties is you should protect yourself from financial disaster in case something bad happens. You don't buy insurance for minor hiccups. A crack in the screen of your cell phone will not lead to dire financial hardship. Don't insure it.
>Low likelihood of using a warranty.
Most products are pretty reliable. And if they do break down, it's usually shortly after purchase, when the manufacturer's warranty has it covered.
>Cost of warranty vs. cost of repair.
Not only are you unlikely to need to use a warranty, but it often costs as much as the repair itself would. So if you buy the warranty, it's like paying for a repair whether you need it or not. It's usually better just to wait to see if the product breaks or malfunctions.
>You might already be covered.
If you purchased an item with a credit card, your card company might automatically extend the manufacturer's warranty. This is more common with high-end cards, such as platinum cards. Check the details of your credit card perks.
>You can build a repair fund instead.
If you're tempted to buy an extended warranty on products you buy, note the cost of the warranty. Then go home and set aside that much cash, perhaps even put it in a separate bank account. Then draw on that account for product repairs you need. This method of self-insurance gives you peace of mind, while keeping the money in your possession, earning interest.
There are only two possible exceptions to the just-say-no rule for extended warranties, says Consumer Reports. They are expensive exercise treadmills and the new rear-projection microdisplay televisions that cost thousands of dollars and have such technology acronyms as LCD, DLP and LCoS, Kotkin said.
Consumer Reports, which bases its conclusions on product repair data, doesn't necessarily advocate extended warranties on these items. But they're the only mainstream products for which consumers should consider buying an extended warranty -- mostly because they're expensive to repair and reliability data is insufficient.
In recent years, Consumer Reports advocated considering an extended warranty on laptop computers. But after it collected more survey data showing laptops are pretty reliable, it now recommends against the warranties.
Surely, some readers will think, "I bought an extended warranty and got a broken product replaced, so it was worth it." In that isolated instance, perhaps that's true.
But go a step further. Total all the extended warranties you ever bought. Measure that against the dollar value of all the extended warranties you used. Regular manufacturer warranties don't count. They come included in the price of the product.
By that measure, most people will agree: Extended warranties aren't worth it.
Copyright © 2005, South Florida Sun-Sentinel
http://www.sun-sentinel.com/business/sfl-ybwarranties14nov14,0,5358142.story?coll=sfl-yourmoney
Just say no to those sales pitches for most extended warranties
By Gregory Karp
KRT
November 14, 2005
It has become routine to step up to the cash register and listen to the obligatory pitch for an extended warranty on a host of purchases from electronics to appliances to eyeglasses.
You know it's coming and you brace for it. And sometimes you say yes.
That's a mistake.
At best, extended warranties are a type of insurance that usually turns out to be a waste of money. At worst, the add-on warranties are cold-hearted ripoffs that play on the fears of consumers during a vulnerable moment.
"Generally, they're not worth it," said Mark Kotkin, associate director of survey research for Consumer Reports, which regularly advises consumers against buying extended warranties.
This holiday-buying season, it might sound like a good idea to plunk down $40 on a three-year warranty to safeguard that $300 electronic gadget. But that's akin to paying nearly $27,000 to insure a $200,000 home for three years. Clearly, nobody would do that.
Extended warranties usually kick in after the manufacturer's warranty expires. Some even overlap.
In nearly every case, extended warranties are a great deal for the salesperson, who receives a fat commission. And they're a bad deal for you because you're unlikely to use the warranty and you're vastly overpaying for protection.
But some consumers are vulnerable during that moment when the warranty is offered, sometimes with a hard-sell pitch. The salesperson asks and waits, wanting an immediate answer to a question many consumers forget to think about ahead of time.
To avoid a mistake in that moment of uncertainty, there's a rule of thumb: Just say no.
Here's why:
>You don't insure little things.
The basic spending-smart rule of insurance and warranties is you should protect yourself from financial disaster in case something bad happens. You don't buy insurance for minor hiccups. A crack in the screen of your cell phone will not lead to dire financial hardship. Don't insure it.
>Low likelihood of using a warranty.
Most products are pretty reliable. And if they do break down, it's usually shortly after purchase, when the manufacturer's warranty has it covered.
>Cost of warranty vs. cost of repair.
Not only are you unlikely to need to use a warranty, but it often costs as much as the repair itself would. So if you buy the warranty, it's like paying for a repair whether you need it or not. It's usually better just to wait to see if the product breaks or malfunctions.
>You might already be covered.
If you purchased an item with a credit card, your card company might automatically extend the manufacturer's warranty. This is more common with high-end cards, such as platinum cards. Check the details of your credit card perks.
>You can build a repair fund instead.
If you're tempted to buy an extended warranty on products you buy, note the cost of the warranty. Then go home and set aside that much cash, perhaps even put it in a separate bank account. Then draw on that account for product repairs you need. This method of self-insurance gives you peace of mind, while keeping the money in your possession, earning interest.
There are only two possible exceptions to the just-say-no rule for extended warranties, says Consumer Reports. They are expensive exercise treadmills and the new rear-projection microdisplay televisions that cost thousands of dollars and have such technology acronyms as LCD, DLP and LCoS, Kotkin said.
Consumer Reports, which bases its conclusions on product repair data, doesn't necessarily advocate extended warranties on these items. But they're the only mainstream products for which consumers should consider buying an extended warranty -- mostly because they're expensive to repair and reliability data is insufficient.
In recent years, Consumer Reports advocated considering an extended warranty on laptop computers. But after it collected more survey data showing laptops are pretty reliable, it now recommends against the warranties.
Surely, some readers will think, "I bought an extended warranty and got a broken product replaced, so it was worth it." In that isolated instance, perhaps that's true.
But go a step further. Total all the extended warranties you ever bought. Measure that against the dollar value of all the extended warranties you used. Regular manufacturer warranties don't count. They come included in the price of the product.
By that measure, most people will agree: Extended warranties aren't worth it.
Copyright © 2005, South Florida Sun-Sentinel