Say “No Thanks” to the Extended Warranty

October 10, 2012

This weekend, Susan and I purchased a bicycle. When we checked out at the register, they asked us if we would like to purchase the two year replacement policy. Now I’m not exactly sure what the two-year replacement policy covers, but the simple fact that it was being offered at the checkout stand at the prompting of a cash register tells me that I probably don’t need to know.

Selling extended warranties and other point-of-sale policies is big business for mass market retailers, but it can also be one of the biggest wastes of money for the consumer. In his article for U.S. News & World Report, our guest blogger David Bakke outlines six reasons why he thinks you should never buy an extended warranty (see http://money.usnews.com/money/blogs/my-money/2012/04/24/6-reasons-why-you-should-never-purchase-an-extended-warranty).

Mr. Bakke concedes that extended warranties may be appropriate for those that cannot live without the additional peace of mind they provide. I admit that even I’ve purchased and have benefited from these types of policies in the past, but I’ve taken a different approach to my purchases now that leads me to align with his conclusions.

1. I’ve decided to purchase products from reputable companies.

A few years ago, I purchased a big screen TV from a name brand manufacturer. After about a year, my picture screen went bad. I called the retail store where I bought it, but without the extended warranty, they were unwilling to do anything. So I then called the manufacturer. they proceeded to send out a technician who confirmed that the screen was bad, and within a week, I had a new screen.  The final cost = $0 even though i was out of the manufacturer’s warranty. Why? Because the manufacturer was willing to stand behind their product.

2. I pay more for quality.

As mentioned above, I doubt I would have received the same consideration from some cheap name brand knockoff. There is usually a reason why some things cost more while others don’t, and it has to do with the quality of the parts and labor.

3. If a product is going to go bad, it will usually happen within the first 90 days.

Depending on the quality of the product, most are designed to last a certain period of time, so if they don’t last as long as they should, it’s usually a defect in the assembly. As such, it will usually manifest itself within a relatively short amount of time following initial operation.

Now, all of this is simply based on personal experience and conjecture, and I can promise you that even if you believe what I’m suggesting, there will be a day when a product is purchased and it becomes defective and you regret not buying the extended warranty.  Well, as Mr. Bakke suggested, for all of the money you saved by not buying the extended warranty on all of those other products, you’ll probably have more than enough to repair or replace the one that causes you problems.