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Do I Need An Extended Warranty/Service Contract?

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There aren't any easy answers when trying to determine if you need an extended warranty/service plan for your purchase. While many people who purchase extended warranties and service contracts are extremely pleased, sometimes it is a rip off or waste of money. The following tips can help you make that decision.

• What do you get for free? Remember that most electronics come with an express manufacturer's warranty. Find out what that is.
• Read the terms/fine print in detail - You don't have to read it at the store. Don't take the salesperson's word for it. Take it home, read it, and buy it later if you think it's a good idea.
• Figure out the coverage term - Be sure to look for the word inclusive; this means the store's coverage overlaps the manufacturer's coverage so a four-year extended warranty really only gives you three additional years beyond the standard one-year warranty the manufacturer gives you.
• Think about accidental damage coverage - Most policies DO NOT cover products that are damaged from falls, spills, and other accidents. You may have to pay more to protect against accidents, but it may pay off for some products.
• Know what the cancellation terms are - If you have buyer's remorse, you can often get a full refund if you do it immediately or you could get a prorated refund later if you haven't used the warranty.
• Look for extras - Many extended warranties cover replaceable items such as projection TV bulbs (which can cost $300). Think about how much you will need this before you get it.
• Research the product's reliability - You can do this by examining a manufacturer's record. Some places to look are: PC World's annual Reliability and Service survey and Consumer Reports' reliability ratings.
• Consider plan cost versus product cost - Here's an example: Best Buy charges $60 for a four-year plan on a $200 CRT television (which is 30% of cost) and charges $400 for a four-year plan on a $4000 projection TV (which is 10% of cost). CRTs don't break down as often so paying the extra percentage would not make sense.
• Shop around for the best warranties/service plans - All the plans are different. Consider that a four-year plan for a Sony rear-projection TV set costs $400 at Best Buy, $525 at Circuit City, and $600 at CompUSA.
• Check your credit card terms - Many credit cards extend the manufacturer's warranty. However, if you need a product repaired, you may have to pay up front and be reimbursed later.

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