I see lots of articles and questions being asked about whether or not someone should buy an extended warranty. Most of the analysis leans towards the not buying side. Typical reasons include “because I never use them” to ” this is where retailers make their most money”.
It is true that retailers make a decent margin on the sales of extended warranties, but is that wrong? The market determines this by supply and demand and for the most part, people are still buying extended warranties because they provide value for what you get.
A person needs to look at their own individual situation. There is no one size fits all scenario. For example, can you afford to have your $600 smart phone break and unexpectedly have to buy a new one? Most people can’t and if your phone does break, you’re the one on the hook for the replacement cost, not the news article you read. Everyone I’ve talked to has a story where an extended warranty could have come in handy.
For my own personal story, I bought a DVD video camera about 6 years ago and paid close to $900. I did not buy the extended warranty at $150. About 1 1/2 years after I bought it, it stopped working. I took it to the repair shop who charged me $75 just to look at it and give a repair estimate which later came in at $500. It made more sense for me to go out and buy a new DVD video camera at around $500, but this time I bought the extended warranty.
Turns out, after about 2 years after that, it also stopped working, but this time I got it fixed under my extended warranty coverage and I still use it to this day. If I had bought the extra coverage in the first place, I could have saved myself a lot of money and upgraded to a newer model when I chose to, not when the thing broke. To me, this is a big thing. Sure I got a newer model product for $500, but my first camera worked fine and I had to come up with another unexpected $500!
Another way to look at it, is to see how you view the manufacturer warranty. Would you buy a product that has no manufacturer warranty? Likely not. In this context, an extended warranty prolongs that coverage and provides value.
Our job at Warranty Life is to provide transparency in the system and allow consumers to track warranties on the things they own. We have a database of over 2 million products that include manuals, manufacturer warranty information, images and service information. We can even track extended warranty coverage all for free.
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By Richard Hui, Warranty Life CEO & Founder