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Be Your Own Warranty


"Would you like to purchase a two year extended warranty for only $49.99?"


Buy anything with moving parts, and you're likely to get asked this question.  Sometimes it's a hard sale by a salesman who's been breathing down your neck for the last hour.  Sometimes it's just a quick option given by the cashier ringing up your purchase.  So this is either going to be a purchase made under pressure or on impulse.  Do those sound like the types of reasons you would want to have for making a purchase?  And what does that tell you about the value of the product you are buying?

I bought a DVD player today for $29.  Did I get the $5 warranty?  No.  The last $29 DVD player I bought lasted 5 years (and that's five hard years of toddler wear and tear)!

Now we all have stories of how a warranty paid off for us.  But how many times have you bought warranties that did NOT paid off?  We never keep track of those.  You pay for it up front and then forget about it.  It's money gone.  Or worse, have you ever bought a warranty and needed to use it but couldn't figure out how or found out your warranty didn't cover the type of break your appliance suffered?

Bottom line: Warranties are very rarely worth the money.

Most things are covered in the first 30 days no matter what, so if they are broken from the start you can get a replacement.  If it lasts through the first 30 days, it's likely to last a lot longer.  Warranties are designed to expire long before your appliances do, so chances are you won't need your warranty in time to use it.

So what can you do instead?  Every time you have the option to buy a warranty, instead of buying it, set that same amount of money aside.  Put it in an envelope labeled "Warranty."  Then when an item breaks, use the cash in the envelope to fix it.  If you want to make a fair comparison, write the appliance and the date on the envelope when you put the money in.  Then see if it breaks before your warranty would have expired.  Chances are you'll find your things breaking just after the warranty would have ended.  That's what they are designed to do.  Otherwise the company offering the warranty would go out of business, since they would be basically giving you two items for the price of one, every time.

If it's a big purchase, like a car, where the price of your warranty would be spread out over in payments over many years, you can still make those payments to yourself. For example, if you are tempted to buy a car warranty for $2000,  on a five year loan. That $2000 is going to add about $40 to your monthly payments.  Instead of buying the warranty, set aside and additional $40 each month in an account specifically for car repairs. You'll find you have the money you need for repairs when you need them, and you won't have a middle man to deal with.

So rather than giving your money away to a company that promises to take care of you in your time of need, keep your money and take care of yourself.


Marcia


P.S. There are exceptions to the rule.

1. If I am buying the floor model of an item, I insist that they throw in an extended warranty for free on the grounds that it may have been damaged why sitting on display.  Stores always do this for me if I ask.  This way I'm covered, but it doesn't cost me anything extra.

2. My phone costs $5 a month to insure.  I usually purchase this type of warranty simply because my kids have a habit of throwing my phone in the pool, the toilet bowl, their breakfast cereal, etc.  So if my phone is new, I pay for the warranty, because I generally ALWAYS need to use it.


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