A salesperson will ask if you would like to buy an extended warranty at the time of sale for just about any electronic device or appliance. But what are you really buying?
“Extended warranties really aren’t warranties at all,” says Julie Rosenberg, spokesperson for Ontario’s Ministry of Consumer and Business Services. “They are actually service agreement contracts that offer additional protection for a specified period of time.”
There are two basic types of extended warranties: those offered by the manufacturer and those offered by the retailer where, often, a third party provides the service. In general, you can expect to pay about 10% to 30% of the purchase price for the extended coverage. You should also know that the salesperson who sells you the extended warranty may get a commission.
Rosenberg recommends doing some investigating before you sign on:
* Is the product you’re buying already covered by another type of insurance you already hold?
“Check your home insurance policy to see if it covers accidental damage, fire or theft for household items,” advises Rosenberg. And if you’re using a credit card to make your purchase, your cardholder agreement may give you extended coverage. Check the agreement or call your credit card company to find out.
Smart tip: Retailers are required to show you the warranty that comes with the product — which may be sufficient for your needs.
* How much are repairs likely to cost?
“For some products, it may be cheaper to repair the item rather than buy an extended warranty for it,” says Rosenberg. (A simple Web search should yield information about the cost of repairs for specific items.)
* What’s the projected cost of replacing the item?
Sometimes the extended warranty costs more than you’d pay to purchase an entirely new item. “This is often the case with smaller electronic items that come down in price over even a short period of time,” notes Rosenberg. Also consider the fact that most items depreciate in value once they’ve been used.
If you decide you want the warranty, you may want to shop around for the best offer. “Extended warranties vary from retailer to retailer,” explains Rosenberg. “Check the wording carefully,” she says, “and make sure you fully understand the coverage and the coverage period being offered.”
For large items that are expensive to ship (such as home-gym equipment), it’s a good idea to look for coverage that includes at-home repairs. Also, try to avoid coverage that overlaps.
Smart tip: If you’re buying a three-year extended warranty, make sure it starts after the manufacturer’s warranty expires rather than at the time of purchase.
The latest from Consumer Reports
A January 2005 report from Consumer Reports generally advises against extended warranties — with three exceptions:
* Treadmills/elliptical trainers. The fee for service on these items can be high even before you add the cost of parts.
* Laptop computers. Consider buying an extended warranty from the manufacturer (not a retailer), since parts are designed specifically for a particular make and model.
* Plasma TVs. Once a manufacturer’s warranty expires, repairs at a service centre can be very expensive.