Extended warranties: If you must buy them, then at least shop them too!
I recently wrote a blog post discussing the high cost of “extended warranties” or “replacement insurance” on small items. The basic premise of my post was that (generally speaking) the lower the the value of an item you are purchasing, the higher the extended warranty cost will be for that item (as a percentage of the item’s value). I generally warned people against such plans but did provide a framework of how to assess whether it would be worth purchasing such a warranty, as there could be rare times when it makes sense (if it had taken a while to save for the item and you would intend to replace it if ever lost– or if like me, you have a penchant for consistently misplacing certain items regularly, like your cell phone).
Just the other day, I saw a great article in The Dallas Morning News entitled “Shop Around before buying an extended electronics warranty” that reinforces much of what I wrote pertaining to extended warranties on merchandise purchases, and also provides more information about these extended warranty products.
I agree with the article’s title, because if you feel like you must buy an extended warranty, then you should treat the purchase of the warranty just like you often treat the purchase of the device: shop around first! The article also provides some helpful guidance along those lines from Consumer Reports, which “says 20 percent of the purchase price of the covered item is the max that anyone should pay for an extended warranty.”
Here is an excerpt from the Dallas Morning News article:
Shoppers are predicted to spend $1.3 billion on extended warranties for electronics and appliances this holiday season, according to industry journal Warranty Week.
Many of those sales will occur at the cash registers of retail stores where otherwise well-educated shoppers unthinkingly agree to inflated warranties.
“Consumers will spend months and months looking for the best deal [on an electronic gadget], waiting for it to go on sale,” said Geoff Green, president and chief executive at Dallas-based Extended Warranty Group.
“And then that same person will spend double what they should on the warranty.”
The gentleman quoted in the article’s excerpt above, Geoff Green, leads the company behind www.electronicwarranty.com, an alternative source to the extended warranties that are often pushed heavily on consumers at the checkout in stores. This to me seems like a very good business idea, and one that pays off for consumers– Mr. Green clearly recognizes that stores are pricing these warranties far too high and has provided another way for consumers to get coverage on such items at a more reasonable cost.
The lesson is this: put some energy not only into shopping for the best price for the item, but also shopping for the best available warranty by looking at sources of warranty coverage beyond the retailer itself — sources such as www.electronicwarranty.com
Happy shopping!
[...] Update: I recently wrote a blog posting (access by clicking here) with updated information about extended warranty products, including a source for purchasing them [...]