We want to make or get as much value of money for our purchases as possible, especially if they are a pretty hefty sum. For example, when buying an expensive laptop, a washing machine, or any other household item, we must think twice before purchasing. Most retailers understand this value-for-money concept and want to bait us into getting an extended warranty.
Let us tell you, and it is a big bait as you have to pay quite a lot for it while the device’s warranty is mostly sufficient. This article shares essential aspects of warranties and why you should avoid them.
What is an Extended Warranty?
Most of the time, you are offered an extended warranty, like an extended car warranty, or for other items you purchase right at the point of sale. The salesperson tells you it is for your benefit and will be helpful if you need repair. The bait here is that repair and parts cost tons, and the insurance company will pay for it.
But in actuality, extended care insurance is for your benefit. The salesperson gets a commission, and the company makes money off of it. These companies run a lot of calculations based on probability metrics for your purchased item. The thing is, they calculate and weigh in the cost of the repair over a duration and average the amount.
Most of the time, you are paying higher premiums for something that might never fail. In most cases, the manufacturer’s warranty is good enough to cover most failures in the item’s lifetime.
Do You Need an Extended Warranty?
According to Consumer Reports and research, refrigerators need a standard repair during their initial five years of use, even less for some other products. If you consider dishwashers, less than 30% will ever need a repair in these years. Similarly, 20% of the clothes dryers may not need a standard repair.
According to these reports, if you factor the repair outside the manufacturer's warranty, the cost of standard repairs is far less than the premiums you pay, for example, for an extended car warranty. Anything else is a minority because most appliances, electronics, and products are far more reliable.
So, at the end, you must understand which parts or items are worth it before moving on to the next section.
6 Prime Reasons You Shouldn’t Go for an Extended Warranty
Now that you know enough about an Extended warranty, here are crucial reasons to avoid it.
Your Manufacturer’s Warrant is Best and Good Enough
Most items and electronics will have a one-year manufacturer’s warranty, typically covering the most essential stuff. They have made the quality checks extensively and understand any fault will cost them. so if anything goes wrong, it will be in the first year. After that, it is just the lifetime of every part.
So, most of the time, you don’t even need an extended warranty as your device or item can easily outlive that while paying unnecessary premiums.
Too Much Fine Print
It is a common practice that we typically don’t read the contractual agreement of the extended warranty and instead fan over the shiny replacement policy. You would be surprised to know that most don’t cover everything.
If you do want to purchase extended care insurance, please read all the terms and conditions and see which ones are worth your money. You can also research different providers and compare the best one for your item.
Value Depreciation
Electronics and consumer products depreciate, as do the parts to repair them. You pay these warranties for the buying value and don't consider depreciation. Sometimes, selling off due to a defect and purchasing a new and better one is cheaper than paying a hefty amount for your extended warranties.
The Need to Repair is Quite Rare
As we said, most consumer products bought from a reliable company are actually reliable. So, most of the time, you don’t need a repair for a faulty part; instead, you may need to change when the life cycle is over. In the Consumer Reports, the percentage amount for repair falls between 5-37% for various appliances or electronics. This low value means you won't need a repair that you should pay for beforehand on an extended warranty.
These Extended Warranties Are Not Cost-effective
For example, if you buy a car today, most extended warranties will cost you about $1,800 just for the first year. There is no way you would ever need a repair for your new or used car for that large amount.
If you buy a used or vintage car, you can already check which parts you need to replace for a full optimal run. You can always consult your trusty mechanic to help you with that. For newer cars, manufacturer warranties are already protecting you enough for any need of repair.
Credit Cards are More Cost Efficient and Have Better Protection
Many credit card companies will offer you great deals on different warranties as part of cash-back rewards. These types of warranty deals are mostly free or at a much better discount, so you won't break the bank for it. If you are engaged with better credit cards, you will get much better protection on top of the manufacturer’s warranty.
Final Thoughts
In this article, we discussed in detail what extended warranties are and whether you need them. In the next section, we discussed a few aspects regarding why they are bait and not worth it.
Now, if you want to consider one for something that is expensive and you cherish it, research it. The first thing is if you need a repair, will you be easily able to do so? You don't need to waste your hard-earned cash if you think so. But if you know you might damage something like your new phone, which costs a lot to repair, you should get one. But don't forget to read the entire agreement.
