|From the Kenosha News on 5-7-06
Extended Warranties may or may not be a good deal
Whenever I buy something electronic (from computers to TVs to calculators) at a retail store, I’m asked if I want the extended warranty or service plan with it. Before you say “yes” or “no” automatically, here are some things to consider.
Remember, if a seller is offering something, they are making money on it. By design, if the product is good, it will break only rarely and after time, so warranties are a form of insurance against defective goods. People who offer extended warranties calculate how often things break, what the average repair cost is, etc., and price their plans to make money. However, items do occasionally fail shortly after the manufacturer’s warranty expires, and most of us want to avoid that sickening situation. Here are some tips to decide if a service plan is right for you.
First, what is the manufacturer’s warranty on the item? Does it cover parts and labor or parts only? Does that seem reasonable given the price of the item and its useful life? (Tip: If you purchase an item with an American Express gold card, you may be entitled to “buyer’s assurance” which doubles the original warranty up to one year.) Also consider how much a repair might cost. On a laptop, a mother board or LCD display failure can cost $895 for the part alone.
Second, ask yourself how likely the item is to fail on its own versus some other type of loss. An extended warranty will NOT cover theft, accidental damage, or loss. So, if you’re buying an iPod for a teenager, the chances of it failing after warranty are much lower than the chances it will be stolen. Consult my June 12, 2005 article on insurance at http://sabbarpublications.com/newsarchive.html. On laptops, the distinction between accidental damage and regular failure is important. If your USB port is damaged, the repair provider may tell you it isn’t under warranty because it was damaged by someone pulling too hard on the USB cable.
Third, who is selling you the extended warranty or service plan? While I have had excellent experiences with manufacturer’s extended warranties from IBM/Lenovo and Apple, I have had poor experiences with reseller’s service plans from Sears and Best Buy. In general, a manufacturer’s extended warranty gives you the same repair options as the original warranty, but for a longer period. This can include on-site repair, carry-in to a repair shop of your choice, or mail-in repair. A reseller’s service plan requires you to have their service personnel perform the repair according to the method stipulated in their agreement.
Be very skeptical of no-lemon replacement warranties. We recently had a TV replaced under such a warranty, but it took eight service calls, dozens of phone calls, and a claim filed with Wisconsin Consumer Protection (Department of Justice.) Read the contract carefully.
In most cases, if you don’t like a service plan, or if you no longer have the item, you can get a pro-rated refund. For example, if you have a service plan on an iPod that gets stolen, you can get a refund on the unused portion of the plan. Check the agreement to be sure. Finally, you generally don’t need to purchase the service plan when you purchase the item. You may have from 30 days until the end of the manufacturer’s warranty to purchase additional coverage. Ask and think it over!
By Carol Sabbar from the Kenosha News on 5-7-06