You know the drill. You are at the checkout line to purchase that new appliance or electronic device and here comes the sales pitch to purchase a service contract or extended warranty for the item. Do you take it or leave it? Be a smart shopper and do your homework!
First of all – what is an extended warranty or service contract and how does it differ from the manufacturer’s warranty? Service Contracts and warranties provide repair or maintenance for a specific period of time. A manufacturer’s warranty is included in the price of an item; a service contract or extended warranty costs extra. It’s an add on that may or may not be worth the price.
Factors to consider in determining if the service contract will bring you “peace of mind” or be a waste of money:
- Do you need one? What is the manufacturer’s warranty? Is the company offering the service contract a trusted source?
- What is the value of the product you are buying? Compare the cost of the extended warranty to the price of the item. Service contracts can be expensive to purchase – typically adding 10 to 30% to the price of the product.
- How reliable or durable is the product? Does the appliance come with high tech features that may require a highly qualified technician to repair?
- Review the service contract details, even the fine print, to determine if the service contract really provides extra coverage. Extended warranties rarely provide full repair or replacement. Find out what is and is not covered . Most of the time coverage will not be the same as the manufacturer’s warranties terms and conditions.
- How are claims handled under the service contract? Do you pay for shipping?
- Can you get the coverage at a better price somewhere else? Does your credit card offer extended warranties as part of its benefit package? Does your homeowner insurance cover accidental damage?
Service contracts and extended warranties differ widely in the level of coverage they provide. Avoid buyer’s remorse by taking your time to check out the details and read the fine print. Once you know the full cost and coverage – it is easier to determine if it really will bring you the “peace of mind” you are seeking.
Want to make smart decisions about other areas of your spending? Check our free online financial assessment at MyMoneyCheckUp (link to the checkup) or call us at 888-258-2227 to go over your spending plan.