Extended Warranties... Just Say No

How many times have you purchased a major appliance and then were offered an extended warranty? You know, for ‘Peace of mind’ or to protect your ‘investment’ (interesting play on words). Well, the sales people who did not offer the warranties are probably no longer working retail. Sales people (as well as the store they work for) make large commissions from the sale of extended warranties.

Salespeople even get special training on how to overcome common objections from consumers! That’s right, sales people are taught how to reply when you say ‘No, the manufacturer offers enough of a warranty’ or ‘I’ll need to speak with my spouse’ or my favorite ‘If the product is a good product, I shouldn’t need an extended warranty’.

The sales person has already been armed with a manual that outlines answers to these objections. A common reply is ‘I understand, but did you know that the extended warranty covers things that the manufacturer warranty does not, such as lightning and surge protection’ (when was the last time you lost a dishwasher to a power surge?). One of my favorites is, ‘I understand you want to discuss it with your spouse. Why don’t we go ahead and put this on your invoice (the good ones never use the word ‘bill’) and if you and your spouse decide not to protect your investment (apparently the word purchase is too painful) you can cancel your warranty within 2 weeks for a full refund. Did you catch the hint of guilt? Not to mention the sales person knows that customers are not likely to refund a warranty once purchased.

I am not totally against warranties, but remember that many homeowner insurance policies cover loss of appliances in certain situations (check with your insurance agent). Also, when it comes to computers and technical electronic equipment you may want to consider purchasing a warranty. A computer is much more likely to fail (I’m guessing 99%) than a refrigerator. Remember, if you do purchase a warranty, then it becomes part of the overall price, so shop accordingly. I know of many situations where a more expensive store offers free or low cost warranties, while a cheaper retail outlet charges higher fees for its warranties.

Remember, when you buy warranties, they are essentially little insurance policies. Ask yourself, o you really want to insure your microwave? What about your portable CD player? If you do decide to purchase an extended warranty, let’s say a 2 year, ask if the two years begin immediately after you purchase the product, or at the end of the manufacturer’s warranty (there is a difference between an EXTENDED warranty, and a warranty). Many extended warranties kick in after the first part of the manufacturer’s warranty ends, usually 90 days after purchase (giving you a total of 2 years and 90 days of full protection). Just use common sense when making large purchases and decide ahead of time how much you want to spend and whether or not you want an extended warranty. Do not allow the sales person to convince you otherwise.

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Bill Pratt is the author of "Extra Credit: The 7 Things Every College Student Needs to Know About Credit, Debt & Ca$h" and "Money Made Simple". You can find tons of useful articles and calculators and have your questions about money answered at www.ExtraCreditBook.com