Are you in the buying mood? You may be spending more money on products than you need to, especially if you love gadgets and electronics. There's a hidden trap that you need to know about: extended warranty plans.
As an electronic technician in the 1980's, I sat at a test bench running products through a testing sequence to see if the electronic components would fail. After that test, I would then run the unit for 20 hours in ovens to see if they would fail over time. What I found out from this extensive testing was that if the piece of electronics did not fail immediately, it would not fail at all for a very long time.
What this means for you is that if you buy a piece of electronics – an LCD TV for example – and take it home, plug it in, and it works, the chances are about 95% that it will continue to work for many years. I am not saying it will never fail, and of course there are the exceptions, but if you stick with the statistics and averages, you will save a lot – I mean a lot – of money by not falling for the sales pitch to purchase an extended warranty for the TV.
Salespeople may not tell you that the store makes a big profit on these warranties, or that they get commissions from them. They may not tell you that the plans overlap the manufacturer's own warranty rather than getting tacked on when the manufacturer's plan runs out. They may not tell you that there is no guarantee the warranty provider will be there when you need them, or that they will provide competent service. They may not tell you that the credit card you use to buy the product may have an extended warranty provision attached to it for free.
If you buy 10 appliances or pieces of electronics over the coming year and you also purchase a service plan for each one, you may have spent an extra $ 1,000 or more on these warranties over the price of the products.
My advice is to never buy an extended warranty for any piece of electronics. Each year take half what you would have spent for the warranty and put it into your savings account. If you finally have a failure in a product outside the original manufacturer's warranty, you will have a pile of money for the repair or replacement.
In some cases you may decide that an extended warranty plan along with the promise of in-home service is attractive enough to spend the money on a plan. Computers and large appliances are good examples. These plans are not cheap, but you may not want to drag your 3 year old PC down the street to the computer store. But if you really want to save money, the law of averages says that you will not have a problem in the warranty period. Let's go shopping!