Every time consumers purchase products they are bombarded with requests
to buy a warranty. Most products come with a standard manufacturer’s warranty.
For computers, cell phones and electronic devices warranties usually last one
year from the date of purchase.
Companies use aggressive tactics to lure consumers into buying
warranties. Unfortunately many consumers do not read or understand the warranty
and many pay for extended warranties that are not needed, never used or not
worth the money.
If you make a purchase such as a home, auto, computer or television, if
you are accident prone, if you are a business owner, if you use a product daily
for personal or business usage, or if you do not have the money to purchase a
newer model consider purchasing a warranty or extended warranty.
Studies and surveys such as those from Consumer Reports have found that
most products do not malfunction during the standard warranty or contract
period. If the product does, the repair cost is either the same or a few
dollars more than the cost of the warranty. If you have a warranty or are
considering purchasing a warranty, here are some fantastic ways to evaluate
warranties to determine if they are worth the money.
Check the Cost
The cost of most extended warranties
range from 10% to 20% of the product sales price. Warranties that cost more
than that are too expensive. For example, a $20 extended warranty on a $60
George Forman grill is not worth the cost. However a $150 warranty on a $1,900
computer is a more reasonable purchase due to the product complexity. The
warranty cost is 7.8% of the total price and covers the cost of replacing
parts.
Jan Rogers Kniffen,
CEO of J Rogers Kniffen WWE, LLC, a consulting firm in the retail sector
believes that warranties are not bad; they are just expensive. "You as a
consumer will price comparison shop for the TV, but once you are buying the TV
you will not price comparison shop for the "gold plated" HD cables,
or the extended warranty, so the retailer has the opportunity to make a
healthier profit on those items."
Research the Company
Research the company using sites such as the Better Business Bureau or
perform a google search “company name and negative reviews” to get feedback on
the reputation of the company.
Ask for Referrals
Ask relatives, friends, colleagues, neighbors or business partners for
referrals for warranty companies.
Compare Plans
Compare plans when purchasing a warranty. Determine what is covered and
what is not. Identify guidelines and restrictions, the location of authorized
service providers, the location of the nearest service repair shop and repair
costs.
Consider the Duration
Consider how long the warranty will last. Warranties vary in duration.
Some last a few months while others may last for 2-5 years depending on the
type of item purchased.
Determine Repair Costs
Determine if technicians are hired on behalf of the customer of if the
customer can select their own. Determine if the company will charge a service fee,
if the product has to be delivered to the retailer or to an
authorized service provider for the repair and if shipping costs will be
charged. Document all communications with the company and ask for confirmation
letters of all conversations or agreements.
Understand the Language
Some warranties such as home warranties are marketed as warranties but
are actually service contracts that insure against the repair of products such
as plumbing, appliances, or electronic devices. Call the company to ask for
clarification or check their website for additional information. In addition,
read the warranty information that was provided when the item was purchased.
Use Insurance
In some instances an insurance policy may be used to cover expensive
repairs instead of a warranty. Warranties should be used for repairs you can
pay for on your own. Insurance should be used for repairs you cannot afford to
pay for on your own. In addition, warranties may not cover expensive repairs.
Verify Coverage
You may already be covered. Many credit card companies provide
warranties or extended warranties for purchases made with a credit card from
one year from the date of the purchase. Verify the warranty coverage to avoid
purchasing double coverage. Some extended warranties overlap manufacturer
warranties so make sure the extended warranty coverage begins when the warranty
coverage ends.
Determine the Product Life Span
Compare the age of each item covered in a warranty versus its average
life span. For products such as cell phones which issue new versions every one
or two years and quickly depreciate in value, purchasing an extended warranty
does not make financial sense.
Check the Cancellation Policy
Determine if the warranty has a cancellation policy, determine the
terms and the cost of cancelling early if the warranty was purchased along with
the product.
