“We believe most people don’t need extended warranties,” executive editor Greg Daugherty told me. “Most products are reasonably reliable these days. If they are going to break it’s probably early on when the manufacturer’s warranty is still in effect or way down the road after the extended warranty would have expired. So you’re buying protection for a fairly limited period of time.”
Service plans aren’t cheap. Consumer Reports says they can raise the price of that item by a third or more. And stores keep 50 percent or more of what they charge for these plans. That’s normally more than they make on the products they sell. That’s why the salespeople push so hard to get you to buy.
“We found that repair costs very often aren’t much higher than the cost of an extended warranty,” Daugherty said. “So in the odd event that you’re going to need a repair, it probably won’t cost you any more than you would have paid for the warranty. And if you don’t need a repair, you get that money.”
Repair service after the sale can be lacking
Based on its surveys of subscribers, Consumer Reports cautions that an extended warranty doesn’t guarantee that you’ll get the item fixed. The salesperson might exaggerate the extent of the coverage or there might be limitations in the fine print you don’t know about.
“We found that people sometimes get a runaround or that it’s just slower to get something repaired by an extended warranty than to take it to the repair shop and get it fixed yourself,” Daugherty explained.
And worse yet, the company might refuse to make repairs under the service contract. ConsumerWorld.org recently ran a story in its Mouse Print section about a woman in the Boston area who paid $298 for a four-year service contract for her washer and dryer back in 2009.
Recently, the washing machine broke. The repairman said he could not fix it under the service plan because the repair would cost $1,300 and the washer was only worth $589. They would pay her the $589, but that was less than the cost of a new washer.
Can they do that? Consumer World’s founder, Edgar Dworsky, checked and indeed the service contract gave the company the option to do that – to declare the product “un-repairable.
The lesson here is to read any service contract you plan to buy before you buy it, and see if it includes the right of the servicer to refuse repairs or to cap its liability,” Dworsky cautioned.