Many stores now are pushing to sell you extended warranties on many products such as electronics, appliances, and vehicles. The truth is that these extended warranties are a waste of money almost 100% of the time. Here's why…
1. Insurance is for catastrophic events
Extended warranties are much like an insurance program for your purchase in the event something happens in the near future you will be reimbursed for any repairs or the item will be replaced. Insurance is intended for catastrophic events that you could not possibly afford or it would really set you back financially causing much pain after the fact. A broken TV or washing machine is not catastrophic. If something breaks then you will be able to get by most likely for less than what the extended warranty costs.
2. Electronics Depreciate
Many appliances an electronics depreciate over time and the price of a brand new one may be less than the extended warranty after a year or two. Save your money and if something happens you may be better off buying a brand new updated product.
3. Most likely will not use it
The chances of something actually needing repairs in excess of the value of the warranty during the warranty coverage period is very rare. Many products come with a manufacturer's warranty that is efficient enough for that one in a million defected items. Next time a store tries selling an extended warranty say ” why is there something wrong with this product?”
4. Company may go out of business
A store or dealer's warranty is only good as long as the company is still in business. If you purchase an extended warranty from a dealer on a new car and that dealer goes out of business a month later than you are out of luck and just lost whatever money you handed over. If the company does not go out of business it may be extremely hard getting them to carry out their end of the bargain after sifting through all the fine print.
My Own Experience…
My wife and I purchased a microfiber couch just after we got married when I first joined the military. The salesman sold us a seven-year warranty that covers all stains and promises to remove the stains or replace the entire couch free of charge. We paid $100 for the warranty and received a small kit with a sponge and a protective spray. They showed us a demo of water just beading right off of the fabric with the protective spray we thought it would be great since we had a new dog that we were trying to potty train. Well needless to say the coating did not work and the cushions soaked up every spill we had. The fabric did not unzip from the cushions and also we cleaned up the fabric the foam underneath soaked up everything and was impossible to remove. We made several attempts to call the number on our warranty and each time after waiting on hold for forever we received a date that a “technician” would come and assess the furniture. They never showed and we continued to call and received more appointments but no one ever came. We eventually gave up and sold the couch.