When we downsized a couple of months ago we had to dispose of most of our furniture, as it just would not fit in our new home.  As a result, we have been doing a lot of shopping lately!

I’m not normally much of a shopper, so I was surprised that almost every transaction ended with a request to purchase an extended warranty.

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Some sales associates just mentioned it almost in passing (at Toys’R’Us for a children’s toy, for example).  Others gave DIRE WARNINGS about the high cost of repairs should the item break down within the next three to five years.

What’s this thing called an extended warranty?

Extended warranties are also called service contracts or maintenance agreements.  They are offered to consumers in addition to the standard warranty on new items, particularly large appliances, electronics, vehicles and, now, even furniture.

They have an extra cost – usually a percentage of the regular retail price – and are offered for multiple years.

The indemnity is to cover the cost of repairs to the item and may include replacement if it’s not economical to repair.  Make sure you read the terms and conditions.

Why are some salespeople so pushy?

Retailers may push hard and strongly urge you to buy their plans because they are a cash cow for them.  Stores may keep 50% or more of the cost, with salespeople reaping a nice 15% commission for themselves.

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Is this something you need?

Repairs may be covered by the manufacturer’s warranty so, even though these warranties are becoming shorter all the time, you may still be buying duplicate coverage.

In the first year the consumer must deal with the manufacturer anyway if there is a malfunction, so a 5-year extended warranty really is only for four years.

Some retailers (e.g. Sears, The Brick) try to sweeten the deal by offering to give your money back if you don’t make a claim.

Check the terms.  You often have only 90 days after the warranty expires to make a claim, and often you only get a credit on your next purchase (within a certain time frame).  Others may give a store gift card.

Sometimes the extended warranty can let you down

Read it carefully to see explicitly what is covered and what is excluded.  Your claim can be denied.  Some people have been dissatisfied with the repairs, or the length of time they had to wait for replacement parts.

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We had a LazyBoy sofa that had extended coverage (it was an insurance claim).  I had accidentally spilled nail polish on the seat.  After trying to clean it off myself with no success, I made a claim.

First we had to turn the sofa upside down to see what the fabric content was – no easy task, it was heavy!  We emailed the manufacturer’s representative who was in the United States.  We waited several days for approval, and several more days for a repairman to appear.

He tried different solvents but was unsuccessful in cleaning the seat.  What do I do now?  Will they replace the sofa?  Unlikely, he said, they will replace the seat cushion fabric and it may not match exactly.  Say, what???

What other options do you have?

  • Buy reliable products.  Do your research by checking Consumer Reports and online reviews.  Read the manufacturer’s warranty.
  • Make sure you check out all the components thoroughly when you bring it home.  If you don’t make ice in your new refrigerator for two years and then find the ice-maker doesn’t work, it’s your own fault.
  • What is the retailer’s return policy?  Some refuse to accept defective merchandise and insist you return the item to the manufacturer. If you run across this policy you should consider shopping elsewhere in the future.  In my case, the retailer (Leon’s) replaced a defective glass stove top.  I returned dining room chairs three times to The Brick before I was satisfied with them.
  • Contact the manufacturer and they may replace your item for free, or at a low cost, especially if there’s a known problem affecting many customers.  When my Keurig coffee maker quit working, I called the 1-800 number and they sent out a brand new pot, even though it was a bit past the warranty period.
  • Your credit card may have you covered if you used it for your purchase.
  • Put the money you would have paid for the service contract into a savings account to cover the cost of a potential repair.  If repairs are not needed, you’ve got some money towards your next purchase.

Final thoughts

Extended warrantees have become common “end-of-sale” add-ons.  Some consumers swear they have saved a lot of money in costly repairs and are glad they purchased one.  You can bargain with the retailer for a lower price if you want it.

However, Consumer Reports (and many financial writers) advise against purchasing extended warranties. Sources say that they are enforced only 12% to 18% of the time.  Products seldom break within the service plan window and repairs may not be that costly.

The manufacturer’s warranty will cover most items.  If you buy a dud, you’ll know it within a few weeks or months.  Otherwise, furniture and appliances (and vehicles) should last a long time.  Small electronics change so much, and have really come down in price, that most people will just buy a new replacement.

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In my opinion, buying an extended warranty sends the message to the manufacturer that they can limit their own coverage.  You shouldn’t have to pay extra to get a manufacturer, or a retailer, to stand behind their products.

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