Have you recently purchased a new sofa to furnish your new house? Are you in the market to buy new big-ticket items? Electronics? Appliances? Car? Computer? Smartphone?
When you buy a new item these days, you’re inundated with requests by the salesperson to buy an extended warranty.
In-store sales staff frequently paint a picture of accidental damage to your purchase that may leave you high and dry.
They often promote the store’s extended warranty as covering pretty much everything (often untrue!) and many a customer have shelled out hundreds of dollars for extended warranties that are pretty much worthless!
Are these extended warranties worth it?
The consensus among consumer protection agencies and advocates is that extended warranties are often not worth it.
According to Consumer Reports, buying a service plan (aka extended warranty) is usually “money down the drain.”
Reasons why an Extended Warranty may not be required
1. Manufacturer’s Warranty: Products and appliances often come with a manufacturer’s warranty that covers you from several days to years. Make sure you’re not doubling up and paying for what’s already covered.
2. Consumer Protection Legislation: Consumers in Canada have certain rights and protections under the law. Products are generally expected to be fit for their intended purpose and have a reasonable life expectancy and durability.
The extent of protection varies by Province, so check with your provincial consumer protection office for the applicable warranty provisions.
3. Credit Card Protection: Many credit cards offer warranties that extend the manufacturer’s warranty when you purchase the product using the card. This coverage is free and may offer to repair, replace, or refund.
The free Tangerine World Mastercard offers a free extended warranty that doubles the manufacturer’s regular warranty for up to an additional year.
4. Product Reliability: Appliances rarely break during the extended warranty period (1-3 years). Granted, there’s no guarantee that this will be your experience.
5. Warranty vs. Repair Costs: An extended warranty does not necessarily mean you’re fully covered. Read the fine print and check what’s covered. There may be exceptions embedded in the terms and conditions of the warranty that render it absolutely useless for your needs.
Also, consider if it’s cheaper for you to just bear the cost of potential repairs if/when they occur.
Alternatives to Buying an Extended Warranty
I have long stopped purchasing extended warranties because I agree that it’s often a waste of money. This was after I had succumbed a few times to sales pressure tactics and bought extended coverage for a tablet, TV, and an office chair (dumb, yes I know!).
By the way, none of these items I purchased an extended warranty for broke down during the coverage period.
Savvy alternatives to purchasing an extended warranty include:
1. Save for the rainy day: Instead of paying for extended warranties, consider putting the funds instead into a high-interest savings account or emergency fund. If any of your purchases break down, you now have a repair or replace fund you can tap into.
2. Do your research: I do extensive research before buying pretty much anything over $20 (sometimes even less). Check reviews of the product online to see what other users have to say about its reliability. Compare and contrast between similar products, manufacturer’s warranties, return policies, etc.
3. Become a DIY Enthusiast: Embrace the Do-It-Yourself (DIY) life. There are loads of resources online detailing how to do minor and major repairs on nearly everything you can think of.
Youtube is my go-to for excellent how-to videos when I’m looking for repair tips. Of course, this approach comes with its own risks. Proceed with caution! 😉
Extended Warranty FAQs
Should I buy an extended warranty on a new car?
The car manufacturer’s warranty generally covers costs of major repairs during the first few years of a new car and you don’t need to pay out of pocket. If you feel the need to, you can purchase coverage after the manufacturer’s warranty expires for peace of mind.
Should I buy an extended warranty on a used car?
Generally, no. You could save money by planning ahead and keeping an emergency fund for repairs. That said, if the car you are buying has a history of being unreliable, an extended warranty that is fairly priced may be worth it.
- Mortgage Life Insurance: Is It Worth Buying?
- 4 Ways To Get Your Credit Score For Free
- Best Cash Back Websites in Canada
- Best Credit Cards for Rental Car insurance
Have extended warranties proven to be useful to you? Tell us about your experience in the comments.