Don't waste money on extended warranties
Filed under: Ripoffs and Scams, Shopping, Technology
Did you ever wonder why electronics store employees spend lots of time trying to talk you into purchasing an extended warranty for your product? They'll say it's for your protection.
The truth is that extended warranties make the electronics stores tons of money – they profit to the tune of 40% to 80% on the warranties. And when there's a big money winner, there's always a loser. In this case, the consumers lose almost every time.
Extended warranties make companies a lot of money because consumers never need them, or if they do, loopholes exclude coverage. So while the salesperson is extolling the virtues of a plan that will cover the repair or replacement cost of your electronic equipment, the fact remains that it's an unnecessary expenditure.Having coverage under and extended warranty makes us feel good. It makes us feel like we're protected if our expensive item malfunctions. But with all the exclusions and hassles consumers are faced with, they most often don't even recover the cost of the warranty.
So take your chances and save your money – don't buy an extended warranty. You'd be much better off taking the money you would have spent on the warranty and putting it in a savings account. That way, you'll have the money if you need to repair the item within the first few years of owning it. And if, like most consumers, your electronic equipment doesn't need a repair, you have just saved yourself a tidy little sum.
Forensic accountant Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations through her company, Sequence Inc. Forensic Accounting. The Association of Certified Fraud Examiners honored Tracy as the 2007 winner of the prestigious Hubbard Award and her first book, Essentials of Corporate Fraud, will be on bookshelves in March 2008.
The truth is that extended warranties make the electronics stores tons of money – they profit to the tune of 40% to 80% on the warranties. And when there's a big money winner, there's always a loser. In this case, the consumers lose almost every time.
Extended warranties make companies a lot of money because consumers never need them, or if they do, loopholes exclude coverage. So while the salesperson is extolling the virtues of a plan that will cover the repair or replacement cost of your electronic equipment, the fact remains that it's an unnecessary expenditure.Having coverage under and extended warranty makes us feel good. It makes us feel like we're protected if our expensive item malfunctions. But with all the exclusions and hassles consumers are faced with, they most often don't even recover the cost of the warranty.
So take your chances and save your money – don't buy an extended warranty. You'd be much better off taking the money you would have spent on the warranty and putting it in a savings account. That way, you'll have the money if you need to repair the item within the first few years of owning it. And if, like most consumers, your electronic equipment doesn't need a repair, you have just saved yourself a tidy little sum.
Forensic accountant Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations through her company, Sequence Inc. Forensic Accounting. The Association of Certified Fraud Examiners honored Tracy as the 2007 winner of the prestigious Hubbard Award and her first book, Essentials of Corporate Fraud, will be on bookshelves in March 2008.
Reader Comments (Page 1 of 1)
12-12-2007 @ 4:07PM
Paul said...
I learned this the hard way! I used to NEVER buy an extended warranty until we bought a pair of laptops from CompUSA. Well, we now have a pair of usless warranties and CompUSA has no answers! All the eleronics storest thattried to sell me and extended warranty over the past 20 years are all out of business.
Save your dough... say NO!
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12-12-2007 @ 4:36PM
JL said...
I usually do not buy extended warranties. The last three big purchases I made I fell for it. First the car warranty, I ended up paying about 2k for it and I only used it once before the time ran out. I think for a 50 dollar motor for my passenger window. The second was an ipod, should have known better, but I didn't. Something was wrong with the dock on my ipod, i wanted to send just the dock back but they wanted me to RMA the whole thing, I was using it to play inbetween sets while the band rested at my wedding so I didn't RMA it. That warranty expired. Now for my most favorite warranty story ever. We got a new puppy, a Soft Coated Wheaten Terrier. We also bought some leather couches. The creepy sales guy really pushed the extended warranty, it would cover any tears, rips, stains blah blah blah. I said does it cover damage by a pet? He said yes, I should have got that in writing. Well, low an behold, 3 weeks after getting the couch the puppy scratched the seat with his paw and ripped the leather. (I generally try to keep a blanket on the couch when the dog is ont here but it had gotten knocked off while I was in the dining room). I called the warranty and they sent out a technician. The tech said, do you have a dog? I said yes, he said did the dog do this? I said I didn't see the dog do it, but he could have, all I know is I have a rip in the leather. Tech takes some notes and some pictures drives away. I get a letter from warranty group, they say that the claim was denied because they do not cover that type of leather. So I called the Roomstore back and said I need a new couch, the customer service said that in the notes that she has from warranty group that the dog caused it and that I can only talk to the warranty group. When it was all said and done I have a somewhat damaged couch but I got the money back for the warranty.
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12-12-2007 @ 6:14PM
Tracy Coenen said...
The CompUSA warranties are still valid. They are serviced by an outside company. Details being posted on WalletPop soon!
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12-15-2007 @ 8:19AM
danielbowen2 said...
What do you think about blue hippo, and what should we do about it?
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12-17-2007 @ 11:46AM
jlf said...
well heres a switch toyota gives you your money back if you dont use your warranty.
i figured for 65k miles ihave the peace of mind up to 100,00 miles. but i have to agree for other less expensive stuff its a waste of money
but just think if the computer goes in a 40k car who do you call ghostbusters. i say no
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12-17-2007 @ 3:16PM
G middleton said...
I disagree. If an extented warranty is offered, and it is backed by a Manufacturer, or equivanlent and the cost is resonable, and can be negoitated................then one had better look at it.
Take an auto new that can take the bumper to bumper on all the majors then I would do it.
A computer is another good idea.
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12-18-2007 @ 1:00PM
BB said...
Avoid Dell computer company. Purchased 3 yr on site extended warranty (July 03) from this bunch, they did not honor their warranty program & took me over 3 years to get my money back. I would also suggest staying away from the BBB of Autsin TX as they were no help either, only interested in maintaining a local member. Get their attention with your wallet.
Bruce Barnett
Memphis TN
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