When is an Extended Warranty Worth the Investment?
Apr. 23, 2012
You did it. You finally worked up the gumption to buy the one product you’ve debated purchasing for months. Whether it is a brand new car, technologically-advanced appliance or the latest electronic gadget, you’ve made it through second guesses, financial calculations and a lengthy check-out line to finally make your purchase. Relieved and excited, you smile as the sales associate rings up your coveted item.
As you daydream about how wonderful life will be with your new “toy”, you realize the sales associate asked you a question. You beg their pardon.
“I asked what sort of protection plan you’d like. We have a number of extended warranty options,” the associate replies.
Your smile fades. Apparently the decision making isn’t quite over after all.
Does this sound familiar? For many people, the question of whether or not to purchase an extended warranty (more appropriately referred to as an extended service plan, or ESP)* is a tough one, and may not be a decision they are prepared to make. When is such a purchase advisable? Will it save money, or just add cost to a purchase? The answers to these questions depend upon a number of factors specific to each purchase. Consider the following before you reach the point-of-sale in the future, and you may save time and avoid stress:
*NOTE: While many store associates and consumers consider the purchase to be an extended warranty, this is often not the case. Many extended plans are not truly adding on to the original manufacturer’s warranty, but rather, extend the post-warranty service options and are therefore more appropriately referred to as an extended service plan, or ESP.
What is the product, and who produced it?
Reputation is always an important consideration when attempting to predict the longevity of a product. Some types of items are statistically more likely than others to need repairs in their first few years of use. According to Consumer Reports, for example, computers, self-powered lawn mowers and certain refrigerator designs top the list of items most likely to fail.
It is important, also, to consider whether the product you’re buying incorporates cutting-edge technology or is a first-generation product. With less of these products existing in the marketplace, there is a higher likelihood of glitches or problems that may not have been discovered during testing. Also, factor in what company created the product you are purchasing. Do they have a history of releasing products before the “bugs” have been worked out?
How much does the product cost, and how tough would it be to replace?
If purchasing an expensive item, it is important to consider how much repairs or replacement would cost versus the cost of an ESP. If the item is of critical importance to you, such as a computer used to make a living, an expensive part failure could be very detrimental.
“For many people, peace of mind is the greatest benefit of an extended service plan,” according to Sean Stapleton, CEO of Warrantech. “They want to know that if their product should cease to function correctly, they will be covered, especially if replacement would be difficult to finance.”
Who is this product for, and how will they handle it?
It is important to consider who will be using the product you’re purchasing, the environment in which it will reside, and the frequency it will be used. Are you buying a product for a young person? Is the item for use while on-the-go? Will you use the product routinely? If the answer to any of these questions is “yes”, you may want the confidence and protection that the product will last. Knowing your end user and end-use environment is important when deciding whether to invest in an extended service plan. Always review plan information carefully, ensuring you know exactly what is and isn’t covered.
The next time you make a significant investment in a product, ask yourself these three questions and be prepared once you get to the point-of-purchase.
Warrantech administers and markets service contracts and after-market warranties on automobiles, automotive components, recreational vehicles, appliances, consumer electronics, computers and computer peripherals for retailers, distributors and manufacturers. Warrantech ESPs are underwritten by sister company AmTrust Group insurance carriers, rated “A” (Excellent) by A.M. Best Company for their financial strength and stability. For more information, visit www.warrantech.com.