Are extended warranties a waste of money?
Posted by: info | November 20, 2006
For the most part if you think extended warranties are a waste of money you may also think buying insurance is as well. You don’t buy a warranty to use it. If you never have to use the warranty then the product has paid for itself anyway. The only time I can think of that an extended warranty would be a waste of money would be if the product or service was no longer in the original working condition and the purchaser did not call the warranty claims department or pursue having the item repaired of replaced. In this situation the money you spent on the warranty would be a complete waste of money. Many people think that sales people are just trying to make money by selling you these warranties. False!!! The sales people are just trying to keep their jobs. They have to meet company standards in order to keep employment and to avoid being talked about by upper management and their inability to sell warranties. The fact is sales people in general would rather not deal with all the stress of having to sell an extended warranty brings on them even though they will may make a few more dollars. It is the companies pushing these products and requiring extreme standards that make the sales people aggressive on these services. At a furniture store I managed in Texas, sales people were surveyed on this exact same cause. Would they like to have an opportunity to sell warranties if they had to the ability to make more money? Out of 91 sales associates 86 said they would not like to sell extended warranties. Guess what? The company did not take this survey into consideration and started selling warranties anyway. I know this is just a small example of results but I think you would be very surprised to learn how much sales people hate selling warranties. I will go a little deeper into this equation, the same furniture store required sales people to have 87% warranty sales. If they could not reach this goal then they first received a verbal warning, then a written warning and then they faced termination after that. The store average was 91% warranty sales for the year. Now, take a look at the warranty sales via the Internet. The Internet sold warranties at a whopping 16% for the exact same items. This is where the idea comes up about sales people wanting to line their pockets. This company is one of the largest furniture stores in America and upper management passed down statements like this ”if not for the warranties they would not need sales people”, instead they would have order takers or clerks who wouldn’t make as much money. For the most part consumers are very educated in this day and time and they should read the warranty in complete detail including the fine print before making a decision. Sometimes the warranty is worth the money depending on the product or service along with the reputation of the company it has in servicing and standing behind the products. Consumers don’t have the same buying habits now as they did in the 70’s, 80’s or even 90’s. Back then we would make long term purchases vs. now we consider keeping the products for a few years or until the next big thing comes out and discard the old one. An example of this would be a sofa. We pay less for a sofa now than we did 20 years ago in a lot of cases. Why? Back then furniture was a major purchase and we planned to keep it on average for 12 years. Now that same sofa has an average of 5 years in the same or similar homes. How long do you want to keep the product should also be considered before buying a warranty. The bottom line or moral to this story is don’t believe everything you hear, use a clear judgment and read the entire warranty including fine print to find any escape clauses you can’t avoid at a later time. A warranty is only as good as the company offering the service, if you can’t talk to them or contact them what good would it do you?
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3 Responses to “Are extended warranties a waste of money?”
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July 12th, 2007 at
I have been able to use my extended warranty quite a bit. I can even cancel it at any time. In my eyes, an extended warranty on a vehicle is well worth it.
July 21st, 2007 at
Big waste of money. You can’t use it.
August 7th, 2007 at
I couldn’t understand some parts of this article, but it sounds interesting…