When Warranties Aren't Worth It
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Do Your Research

Think about what you'd really like to do on your vacation and create a list to narrow your choices - whether it's hitting the beach, going shopping, climbing a mountain or visiting a museum. Consider whether you can do this somewhere nearby, or whether you know anyone who has done your chosen activities before on a similar budget. Alternatively, travel agencies or even chat rooms on the topic can provide great advice on accommodations, places to dine, things to do and tourist traps to avoid. Internet sites such as Yahoo! Travel, Expedia and Priceline are often useful when seeking reasonable fares.

We've all heard the salesperson say, "we highly recommend protecting your item with our store's extended warranty package that will cover all repair costs incurred within three years". More often than not, you get sucked into buying the package, as the investment in the electronic item is huge. But will you get the best returns? Chances are little to none. (For more, see Extended Warranties: Should You Take The Bait?)

Manufacturer Warranty Or Extended Warranty?

It seems as though almost every electronic item comes with an extended warranty plan that acts like an insurance policy, promising to cover all your repair and damage costs for a particular period of time after your purchase. However, in most cases the appliances you buy come with a manufacturer warranty that will cover your repair cost for a year. In that case, your retail warranty plan will more or less be a waste at least for the first year.

Minimize Your Losses

On average, the frequency of repairs on electronic appliances such as a GPS probably won't occur at all. Studies and surveys conducted by Consumer Reports show that it is most likely a consumer would identify a glitch with the product either very early on or years later when the item starts to wear out. In case of an early damage, the product will be under the return period of the retail store.

Buying Warranties Later

You may buy a new car after watching the auto show in the city and decide to purchase the extended warranty plan with it. Chances are you will find yourself in a bigger loss when the repair cost of the damage will be lesser than what you paid for the plan. Sixty-five percent of the 8,000 Consumer Reports readers said that they spent way more on these plans than they got back on repair-cost saving.

Don't Miss The Fine Print

Once you have decided to purchase a warranty plan for your item, don't forget to get all the details of the coverage. A bad package would often have a large number of exclusions, the consumers would be expected to pay out of their pocket for certain repairs and their definition of "damage" might be different. Additionally, it's always a good idea to check the company's customer service track record before buying the plan. (For more, check out Did You Buy A Lemon?)

What Does the Retailer Get?

The retailer is not in for a great profit when you decide to buy the LCD Plasma television with speakers on sale. But they intend to turn around their profit through the extended warranty that they will sell you. The December 2010 Consumer Report article observed that two of every three in-store shoppers were offered to buy the extended warranty and one in every eight in-store customer actually bought the warranty. The percentage of profits varies, but retailers make as much as 50% profit.

Cheating Or Selling?

However, retailers don't cheat you, they just sell you, said Jan Rogers Kniffen, CEO of J Rogers Kniffen WWE, LLC, a consulting firm in the retail sector. Kniffen believes that warranties are not bad; they are just expensive. (For a related reading, see Consumer Protection Laws You Need To Know.)


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