All Financial Wisdom
Why You Shouldn’t Buy Extended Warranties
You're better off setting aside the money you would spend on a warranty to cover the repair costs yourself.
I recently bought a new flatscreen TV from a major retailer over Christmas and the cashier's damn near insistence that I buy a warranty prompted this note. When you need to repair your car, refrigerator, computer or an important home system, it's usually a relief that you won't have to pay for the repairs yourself when you remember that you bought that overpriced warranty during checkout. No wonder people are so willing to buy extended warranties that cover repair costs to the many companies that sell them.
Sometimes these protection plans are also called maintenance service contracts or protection policies. But whatever the name, my advice is the same: avoid them.
Extended warranties can have many pitfalls, and are backed up in the small print of the contract to reject coverage for virtually any reason. They have become an important source of complaints to the Better Business Bureau and elsewhere.
"Accidental damage may not be covered. And there may be clauses that allow the company to refuse coverage if, for example, routine maintenance instructions are not followed, "the Federal Trade Commission says.
Also, extended warranties may exclude some spare parts. For example, ice machines, beverage dispensers, rubber seals or door gaskets, hinges, lights, and other appliances that are not covered under a home maintenance service agreement recently reviewed. A car maintenance contract we analyze excludes brake drums and rotors, airbags, handles, lock cylinders, exhaust system and body panels, among other parts. Seriously?
Can you prove that the part was not already broken when you contracted the service, which is an alleged pre-existing condition? Was the problem caused by a factory defect or an accumulation of sediment, rust, or mold? Is it a cosmetic problem that does not affect the operation of the item in question? All of aforementioned may be grounds for the provider to reject your claim.
Some extended warranties simply duplicate the written warranty coverage you have with the manufacturer, which you are required to use in the first place. And along with the cost and the initial deductibles, some plans charge you a commission every time you file a claim.
If the plan allows you to use your own repair shop, as with many extended car warranties, the shop should usually get approval from the supplier before starting work, a big mess that some workshops may seem to be too much of a nuisance.
There is even another cause for concern, for suppliers to fail and leave customers without the coverage for which they paid, warns the FTC. This is a problem that is prevalent in many third party guarantees, as opposed to those offered by product manufacturers.
Extended warranties may seem like a good idea.
Some companies make a lot of promises while they tout their extended warranties, and leave many consumers to fall victim to the fine print.
Last August, the state attorney general filed a lawsuit against Comcast Corporation, one of the nation's largest telecommunications service providers, accusing him, among other things, of charging customers at least $ 73 million in subscription fees to a plan that had virtually no value.
The plan was promoted as the home's internal wiring coverage and equipment connected to Comcast services. However, the suit alleges that Comcast did not properly communicate that the plan did not apply to wiring located inside the walls, which, it was said, represents the vast majority of the house wiring. The plan also did not cover repairs to client-owned equipment, only the cost of the technician's visit, as stated in the complaint.
Despite being notified of the problems more than a year ago, according to the attorney general, the company only started the changes recently.
In a prepared statement, Comcast said the plan has given customers "great value by fully covering more than 99% of repair orders."
"We support our products and services, and we will defend ourselves vigorously," he said. Right. Why apologize and try to do better by customers? Poor customer service is just one aof several dozen reasons why pay TV is struggling.
Not worth the cost.
This doesn't mean that all extended warranties are bad or that it's impossible for you to benefit from buying one. But even with the best plans, it is likely that, in the long run, it is not worth spending money on them.
Many products today are very reliable and are unlikely to require large or even small repairs before you replace them. And with the speed at which technology is changing in the case of cars, computers and many other items, the time it takes to replace them may be much shorter than you think.
Keep in mind also that many credit cards automatically extend the manufacturer's guarantees for the products you pay with them for about a year, and thus the maintenance contracts are still less attractive.
And just because the manufacturer's warranty is complete, it does not necessarily mean that your luck is over. Many manufacturers have so-called goodwill programs to pay, in part or in full, the cost if a product breaks down over too short a time, particularly if it is a known design or manufacturing problem. And you could also have so-called implicit warranty rights that apply to the manufacturer, the distributor, or both, which can extend the scope and duration of your protection.
Finally, depending on your skills and the severity of the problem, you could fix it yourself. There are many "do-it-yourself" videos and websites available today, and many of them are provided by companies that sell parts for much less than you would pay the repair shop.
A better alternative.
Start by buying reliable products, and keep them well maintained as recommended by the manufacturer. Instead of buying extended warranties, save the money you would have spent on a savings account, or even start a safety fund for repair and replacement of products.
If something needs to be repaired or maintained, you can therefore pay for it with money from the fund, without having to negotiate the limitations of the fine print or other nonsense. If at the end you do not need any repairs, use that money to replace the item when the time comes, and buy yourself something nice. Life's short. We all deserve to treat ourselves right?