Now that the holidays are behind us, I know a lot of people just received a lot of very expensive items. Many of these items, such as cell phones, computers, appliances, and furniture are going to need warranties. So, let’s talk about how to get the best bang for your buck on a warranty.
Warranties are an interesting topic. They can either be the best money you’ve ever spent, or the biggest waste ever. To me, that means it’s worth a very close look. I know some people automatically get the warranty on any large purchase, but in some cases, it isn’t a very good deal.
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Most brick and mortar stores put a huge markup on their warranties knowing that a large percentage of purchasers won’t ever use them. It’s sort of like health clubs – they count on probably 75-80% of their subscribers working out a few times and then dropping out. If everyone who had a membership showed up on any particular day, they probably wouldn’t even fit into the building. The conservative estimate is that only about $20 of every $100 spent on a warranty goes towards repair costs. The other $80 is going straight into the store’s pocket. That’s not the kind of charity I like to support – how ’bout you?
So, the first question you need to ask is does a warranty make sense for this item? How likely is this item going to be to break down? In my experience, large appliances such as refrigerators, washing machines, and dishwashers very rarely break down. I have literally had the same fridge for 21 years and I’ve never had a moment’s trouble with it. On the other hand, a few years back, my brand new iPhone 4 ended up in the washing machine within 6 weeks of purchase (sigh). More on that in a minute…
Another question to ask is how expensive would a repair be? I always purchase a car warranty without question, even though I know it’s costly because certain car repairs can be so expensive. On the other hand, I didn’t bother with a warranty on my son’s new Kindle. It was an $80 product and they wanted $30 for the warranty. When the prices are that close, the warranty doesn’t make sense. At that point, if anything happened, you would just suck it up and put that $30 towards a new one instead of wasting it on a warranty you are unlikely to use.
If you do decide that a warranty is a good idea, is the store version your only choice or even your BEST choice? Nope! Like any other profitable item, there are multiple companies that sell warranties on many items, like cars, appliances, or electronics. You just have to do your homework and make sure it is a reputable company.
I found SquareTrade, Inc. back when I was an Ebay seller. They specialize in warranties on various large and small electronics from Ebay, but also ALL major retailers – such as Best Buy or Walmart. For instance, when I bought my iPhone, the Verizon warranty would have been $199 a year plus $99 per replacement and I think they didn’t cover water damage. The same warranty through SquareTrade was just $5 per month and just $50 per replacement and it does cover both drops and water damage, although not loss or theft.
So, when my poor phone had it’s little bath, SquareTrade not only had my replacement in my hands in 48 hours, but they even sent me a 16 gig instead of an 8 gig (I think just because they were out of stock on 8 gigs). I had a similar experience with them when the hard drive crashed on my computer. I took it to a local repair shop and kept the receipt and they reimbursed me within a day or so. (If you do give SquareTrade a try, give them my blog name as the referral – I’m likely to get a discount on my next warranty!)
If you jump quickly – before the end of the year, then you have a chance to save 25% off their regular prices, but the offer expires 12/31/2015, so don’t delay.
On the other hand, you have my in-laws. I think they were “warranty junkies” and they made sure they got their money out of them! I remember half a dozen times when they had their washer or dishwasher being worked on and it was all paid for with the warranty. The reason that worked for them was because they were diligent about keeping all the receipts and paperwork (these were in pre-computer days) and they were not shy about having the tiniest little problem fixed under their warranty.
If you do go the warranty route, keeping good records is very important. You need to know exactly when your warranties stop and start, how to renew them every year, and what types of repairs are covered. That can save you a bunch of nice, juicy money on all your shiny new Christmas toys.
Photo credit – Image courtesy of [Joomphong] / FreeDigitalPhotos.net
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