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Should I Buy an Extended Warranty ?

Extended warranties are available for more products than ever and the reason is simple, they are very profitable. When you purchase any kind of appliance, electronics or other device these days, you almost certainly will be offered an extended warranty. Typically, the warranty either doubles the manufacturer's warranty or extends it by a year or more, in one year increments. The price for the warranty goes up as the length of the protection goes up.

These warranties usually are not backed by the manufacturer or the retailer. Extended warranties are most often backed by an independent company whose business is selling extended warranties. Your service and satisfaction is entirely dependent upon the terms of the warranty contract and the customer service the company provides.

The retailer makes a commission on every warranty they sell and in some cases so does the employee who makes the sale. The salespeople offering the warranty rarely know very much about the warranty and are typically trained to tell you that it covers "everything". However, they don't cover things like accidental damage, wear and tear, or theft; they typically mirror the manufacturer warranty - although that is not a certainty. Read the contract before purchasing to be sure you are getting what you expect.

Warranty contracts buy peace-of-mind and that alone may make them worthwhile to you, if you would otherwise worry about your product needing repair or replacement. However, the price of the contract is often roughly the cost of one repair. So you would only save money if your product needed more than one repair. Also, there is a good chance that your product won't need repair during the term of the warranty and so you save nothing, you lose money because you effectively pay for a repair that you never need.

Another consideration for some warranties is whether you would want an older product repaired. Would you have preferred to apply the cost of the warranty to the price of a new product a few years from now when replacement is necessary?

Whether you purchase a warranty is partly dependent upon how much you want the peace-of-mind. You could also deposit the price of the warranty in a savings account and enjoy the peace-of-mind that you have set aside some money for the event a repair is needed. Your decision should also be dependent upon whether the price makes sense. Purchasing a $100 warranty on a $300 appliance is probably not the best investment. If you do want a warranty, don't be afraid to negotiate the price. The retailer can deduct the discount from their commission on the warranty.

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