How to Beware Of Extended Warranty Scams

In most cases when you purchase appliances, electronics and cars you receive pressure from the salesperson to purchase an extended warranty. You will be told that the extended warranty will cover repairs that are not covered by the manufacturer's warranty or will cover repairs after the manufacturer's warranty expires. The hard part is determining if the extended warranty is a good deal or a scam.

Instructions

Difficulty: Moderately Easy

1. Compare the cost of the extended warranty with the replacement cost of the item. If you are purchasing an item for $20 it makes no sense to buy an extended warranty for $10. You are better off taking your chances and replacing the item if it breaks.
2. Find out the exact terms of the manufacturer's warranty and the extended warranty. You might find that the extended warranty is a scam and does not cover anything beyond the manufacturer's warranty. You want the extended warranty to go into effect after the manufacturer's warranty expires.
3. Ask the store who is offering the warranty. An extended warranty could be offered by the retailer selling the product but it might also be offered by an outside agency. If it is not offered by the retailer, you have to be concerned that the outside agency could go out of business before your warranty expires. If that happens, the warranty will provide you no protection.
4. Consider providing your own warranty. If you take the money that you would pay for an extended warranty and put it aside in a separate, interest bearing account, you may find that you have enough money to pay for the repair should one be necessary.

Tips & Warnings

• It's usually wise not to buy an extended warranty for electronic products. Most issues with electronic products occur within the first month or two of purchase, certainly within the limits of most manufacturer's warranties.