So, here is how it usually plays out. You get a brand new air conditioner, computer or washing machine, and the salesperson starts to ask you if you would like to extend the warranty for a few hundred dollars. He even throws in a very convincing story of another customer that was ‘saved’ by the extended warranty. It’s a few hundred dollars, and you are not sure if you should get it. But, is an extended warranty actually worth it? Or is it just a mind game designed to make you part with your money?
When it comes to thinking about extended warranties, it’s best to prepare yourself mentally before buying electrical appliances.
Here are 6 reasons why extended warranties are not worth getting.
1. You pick up an extended warranty as an impulse buy
When you have 10 seconds or less to take a call on a life altering issue, you will go with the safe option, you will pay up. The geeks who work in the psychological warfare department of sales know this!
The ‘question’ is usually popped at the point of sale, leaving you with very little time to let your cautious self, kick in. Though you may not notice it, the pressure on you at this stage is immense.
It takes a lot for an average shopper, to say no.
- Do not let the swords be drawn and quietly walk away from the counter, after you make up your mind about what to buy.
- Get a drink, grab a bite and then come back to pick up your purchase.
2. Products don’t last forever and neither do warranties
Be analytical. What we mean is that you should change your perspective to let your mind function objectively.
Here is how most of the products you buy will behave.
- A malfunctioning product, usually breaks down early in its existence, when it is covered by the manufacturer’s warranty.
- If it lives through the manufacturer’s warranty period, then the probability of it breaking down at a later stage greatly reduces.
This renders your extended warranty useless.
Do remember, products come with a shelf-life. Used long enough, any product will eventually go bad; and this eventuality usually occurs after the expiration of the extended warranty.
3. An extended warranty is weaved around the fear of loss
The best sales guys have a talent of going for the jugular, and in this case the jugular is a concept known as loss aversion. Warranties tap a specific insecurity in us, the one where we hate losing things.
The displeasure we experience from the fear of loss is so great that we skip the joy of acquiring that thing in the first place. And since this is common knowledge, the guys play on our worst fears, milking us to the last penny by restoring our faith in the power of money when it comes to protecting devices.
Related: 8 Ways to Save on Home Appliances
4. The numbers don’t add up
If you were a keen student of numbers when they were being taught in school, you would have come across a term called depreciation. Depreciation applies very often to the value of stuff that is under warranty – we mean electronic and electric goods.
Electronics, by the time they reach the time period for which they have been covered by the dearly bought extended warranty, have depreciated so much in value that they are at a fraction of their original retail value.
5. Look at warranty extensions that come in as freebies
Other than the basic level of manufacturer’s warranty, your product can also be covered by other advanced warranties that you don’t have to necessarily pay for. One of these freebies is the credit card warranty extension.
Some cards offer to boost the manufacturer’s warranty if used for purchase of a particular product. Read the fine print and stay on top of product-card offers when you go shopping.
6. Easy come easy go
Electronics typically last very long. Most of them are now quite affordable so easily replaced as well. And very often, one tends to replace or upgrade even before the gadget begins to huff and puff.
This use and discard phenomenon that has taken over the gadget world plays a huge part in making extended warranties redundant.
How about fridges and washing machines? We don’t want to replace them in a year. See point 2, where we mentioned that if the product can last past its manufacturer’s warranty, it will likely last for many more years.
What to do instead
1. Subscribe to a flexible insurance plan
Sensing that extended warranties are entering the league of dinosaurs, warranty schemes without boundaries are coming into play. LoveHome, for example, covers five common home appliances. For a flat annual charge, LoveHome will fix your faulty appliance with the expired warranty. And they are not choosy about the brand, the age or the place of purchase.
2. Create an emergency fund
Emergency fund sounds fatalistic, but it is very simple really. Just put a chunk of money aside for when gadgets break down; this way you won’t have to cut corners or break the bank when you need to make an unscheduled big-ticket purchase.
You can also keep topping it up when you have some extra cash lying around. The good thing is that if unused, it’s still yours!
3. Bank the warranty money
A variation of the emergency fund, this one is styled on the instalment method. This is how it works – with every purchase, instead of buying extended warranty, you deposit the same amount in a savings account.
In case of unforeseen expenditure on a gadget, you will have this amount to fall back on; otherwise it stays busy collecting interest.
Have any more ideas? We are all ears.