EXTENDED WARRANTIES

By Alma Copeland, Home Economist

TEAM Resources

Retailers push hard to get you to buy extended warranties, or service plans, because the store keeps 50% or more of what they charge for warranties. That's more than they can make selling the actual products.

For consumers, extended warranties are notoriously bad deals because:

• Products seldom break within the extended-warranty window (typically around three years).
• When electronics and appliances do break, the repair often costs about the same as the cost of the warranty.

If you feel you must buy an extended warranty

• First Check Your Credit Card. Before you say yes to an extended warranty on any product. See whether your credit card provides similar coverage.
• Shop Around. Extended warranties vary in length and terms. Don't pay more than 20% of the purchase price for one. Always try to negotiate a better price.
• Beware of Hidden "Gotchas". For heavy items such as large TVs or major appliances, ask whether the extended warranty includes in home repair or pickup. For TVs, who installs it? If the product will be repaired, is there a lemon clause stating that after a few repairs the product is replaced?

Two Possible Exceptions

It's worth considering an extended warranty if you're buying a rear-projection micro display TV. Repair costs can be high and these sets have been three times more likely to need repairs than other types of TVs.

The Consumers Association of Canada thinks it may be wise to get an extended warranty, which includes extended tech support if you are buying an Apple computer, because they come with only 90 days of phone tech support.

The hard sell for extended warranties is coming at the same time that manufacturers' warranties are getting skimpier. Companies are reducing coverage for everything from appliances to TVs.

It's important to investigate the manufacturer's warranty coverage before purchasing any product, and patronize those manufacturers that offer decent warranties. More importantly, buy from manufacturers whose products are reliable in the first place. Consumer Reports magazine and its Website, www.consumerreports.org, contain brand reliability information for major products they test.

Source: SaskWatch, published by Consumers' Association of Canada (Saskatchewan), April 2007.