Show #505 Airing Sunday 12/27/09
You did your homework, you shopped around, and you picked out a new computer, or a TV set, or a refrigerator. And hopefully, you got a good price. You’re all set to pay but then the store clerk throws you a curve ball . . . . . Don’t you want to protect your major purchase with an extended warranty? Hmm, should you cough up the extra money or just take your chances? To give us an extended answer, we’ve extended an invitation to my law partner, Mike Solomon.
Question:What's an extended warranty?
Answer: Let’s start with the fact that for just about everything you buy, you automatically get a basic warranty. If the product breaks within a period set by the manufacturer, often 6 months to a year. An extended warranty is an optional purchase that will protect you for an extra period, typically two to three years, but this comes at a price.
Question:Should we buy an extended warranty?
Answer: In general, the answer is no. Most consumer experts believe that extended warranties are rip-offs. According to studies by consumer reports, products rarely break during the extended warranty period. And when items do break, the cost of repairs is usually the same or less than the cost for the extended warranty.
Question:If that's true, why do sales clerks often push extended warranties?
Answer: Because the profit margin for extended warranties is huge, usually 50% or more. In fact, many stores make more money on selling the extended warranty than on the sale of the product itself.
Question:Is there any less costly way to get the same protection?
Answer: There may be. Check your credit card contract. Some credit cards offer extended warranty protection for free for items purchased using that credit card. These benefits can be found most often with gold and platinum cards.
Question:What happens if I don't get any added protection and an item breaks soon after I get it home?
Answer: Almost all items come with a basic warranty, either written or implied in the law. Items are supposed to work when you buy them. So if you get your new TV home and it breaks down before you can watch the super bowl, take it back. You almost certainly have a right to a refund.
Don’t get snookered. Extended warranties are usually not worth the cost. They’re a good deal . . . . . for the store. But generally not for you. For more information, try the Federal Trade Commission’s web site at www.ftc.gov.
