Educate yourself before buying extended warranty

Manufacturers and retailers often suggest that paying extra for an extended warranty is buying peace of mind. But many consumer experts and shoppers say that's certainly not always the case.

Complaints about extended warranties tend to center on the cost, the coverage and the inconvenience.

"You're under a lot of pressure to buy them, because they're very profitable for the companies," says Jack Gillis, spokesman for the Consumer Federation of America.

Four things to remember about extended warranties and service contracts:

The repair may be free, but that doesn't mean it's hassle-free.

You still have to deal with the typical — and some not-so-typical — travails of product repairs. For example, getting a big-screen TV repaired by Best Buy bby typically involves three service visits. The first is from the Geek Squad to take the TV off the wall; the second, from a contractor who will (hopefully) repair it; and a third visit, again, from the Geek Squad, to put the TV back on the wall.

"If you pay for comprehensive protection, and your large flat-screen isn't working properly, would you really want to take down that bulky equipment on your own ... or 'help' a repair person lift each end of the TV so it can be analyzed and fixed?" asks Best Buy spokeswoman Paula Baldwin. "Of course not. That is why we schedule separate install and repair team personnel, since de-installing and re-installing a monitor off a mount may require a different skill set than the actual electronics repair."

It's not what a salesperson tells you; it's what's in the fine print.

Eager to earn a commission, a salesperson may say whatever it takes to sell the contracts. That's what Gay Pitz of Baltimore says happened when she paid $79.99 for an extended-service contract on a $500 Sony camera at Best Buy. She says she complained to ConsumerAffairs.com because the Best Buy salesperson "heavily recommended" the contract because "whatever happened ... short of losing it," the camera would be covered.

A few weeks later, Pitz took the camera out of her purse, and the screen was black. But when she went back to Best Buy, the manager told her the warranty only covered manufacturer defects.

"I just feel like I have been very wronged and very misled," says Pitz.

"So-called verbal contracts are a myth," says David Wood, an investigative reporter for ConsumerAffairs.com.

Best Buy's Baldwin says the chain makes adjustments to its service plans. It will do so "while also keeping our service plan offerings simple. It is to the benefit of both Best Buy and our customers if the protection levels are easy to understand and even easier to apply." For example, the "Black Tie Geek Squad Protection" plan runs 23 pages. It can be found at http://tinyurl.com/nf9r8r.

Stores and dealers take in a lot of money and rarely pay it out.

Service contracts are profitable because while everything eventually breaks, it's often after warranties or service contracts have expired.

Still, 32% of people bought extended warranties on their new cars last year, says National Automobile Dealers Association chief economist Paul Taylor. Butch Hollister, a NADA financial consultant to dealers, says his 93-year-old father just got one for his new Chrysler 300. Cars are "fallible, very high-priced, and when they break down, it's a huge frustration and very expensive," says Hollister, a former car dealer.

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