The Pros and Cons of Extended Warranties
When you purchase a new or used product, a sales rep may very likely try to sell you on an extended warranty. While the thought of not having to pay out of pocket to repair the item if and when it breaks down may be appealing, you might understandably wonder if the extended warranty is really worth the extra money.
With this question in mind, let’s take a look at the differences between a regular and extended warranty, as well as the pros and cons of purchasing the extended version.
Know What the Regular Warranty Covers
Before shelling out big bucks for an extended warranty, you should inquire about whether the product is already covered with some type of basic warranty. This tends to be the case when purchasing new tires. In fact, tire manufacturers often provide different warranty options on their tires at no extra cost. For example, every one of Michelin’s winter tires automatically comes with a mileage warranty that’s good for 25,000 to 40,000 miles, depending on the specific tire you buy.
If you decide to purchase a Michelin Defender T+H tire, it will come with a mileage warranty up to 80,000 miles. In general, a mileage warranty guarantees that you’ll be able to drive a certain number of miles on these tires before they wear out; if they must be replaced prior to reaching this threshold, the manufacturer will usually offer a prorated refund for the difference.
To be eligible for this type of warranty, you’ll have to show proof that your tires were serviced regularly according to the manufacturer’s specifications. Depending on the warranty you’re eyeing, you may find that the included warranty is more advantageous and that spending money for additional coverage isn’t worth it.
Realize the Benefits of Extended Warranties
The main benefit of purchasing an extended warranty is the appeal of saving money on future repairs. If you buy a refrigerator that comes with a two-year warranty, you might be tempted to spend extra for an extended warranty that’s good for five, seven or even 10 years. This way, if the cooling coils conk out after three years, you won’t have to pay a pretty penny to fix them.
As Super Money notes, buying an extended warranty boils down to your personal tolerance for risk. In the case of an extended warranty on a new or pre-owned car, you can often customize what type of coverage you’re buying. Plus, knowing your vehicle is covered for repairs for years to come can give you better peace of mind.
Understand the Downsides of Extended Warranties
According to Consumer Reports, extended warranties tend to have so many “gotchas” and fine print that denies coverage that they’re rarely worth the money. For example, extended warranties often exclude a number of parts; in the case of a refrigerator, you might find that it doesn’t cover broken or inoperable ice makers, door seals, gaskets, handles and lighting.
Meantime, extended service contracts for cars may exclude key parts of the vehicle, like brake drums and rotors, airbags, exhaust systems and more. Other downsides to buying an extended warranty are that some plans charge a fee every time you make a claim — and some warranties dictate who can make the repairs to your vehicle or product.
Why Maintaining Your Belongings May be the Better Way
Rather than shelling out big bucks for an extended warranty, you may want to stick with the one that comes with your purchase and then maintain it according to the manufacturer’s specifications. In addition to heeding that advice, put the money you would have spent on the extended warranty into a savings account and use this money as a rainy day fund.