When you purchase a new product for your home or life, one of the first decisions you have to make is whether you should buy a warranty. Many stores even offer the warranties at the cash register as you are making the purchase. The question of whether to buy a warranty is a big decision. On one hand it just makes sense to spend a few extra dollars so you don’t have to worry about the item breaking, but on the other hand, it seems like such a gamble. Do you buy the extended coverage? What about the included manufacturer warranty? Am I just throwing my money away?
6 Questions to Ask before you Purchase a Warranty
Warranties are available for almost every item you purchase – from coffee pots and furniture, to computers and vehicles. I can’t decide whether this is a wise purchase, but I can offer you a few tips to help you decide whether to purchase a warranty or pocket the money.
Can you easily afford to replace the item?
Think about how much the item is costing you. Could you afford to replace the item if it breaks in the next year? How long has it taken you to save for the purchase? If you look at your budget and it would not financially hurt you to replace the item in 12 months, then maybe you don’t need to spend the money on the warranty.
What will you do if the item breaks?
Is this purchase something that you MUST replace immediately if it breaks or is it something you can save for over time? If it is a must-have, then you might want to purchase the warranty so you don’t have to worry about not having the item.
Will the item still be valuable over the life of an extended warranty?
Let’s face it…. A computer or phone that is cutting edge technology today will probably be old news in 3 years. So is it worth it to buy an extended warranty? Are you planning to keep the item for the life of the warranty or will you be ready to upgrade before the warranty expires?
Is the warranty transferrable?
When we purchased new windows for our house, one of the selling points was that we could transfer the warranty to a new owner. That warranty made great financial sense because the windows were covered for the lifetime of the house, not just for the initial owner.
Can you Save the Warranty Money Instead?
I had one friend who never purchases a warranty. Instead, he puts the amount of money that he would have used toward a warranty into a special savings account. Since he has been doing that for years, he has a nice savings account built up. Now if an item happens to break, he can use that nest egg for a purchase; but he doesn’t waste the warranty money on a possibility that he would have needed it.
Is there a Manufacturer Warranty?
Many items come with an automatic one-year warranty included in the purchase. Before you purchase additional warranty coverage, check the packaging and product. No sense in paying for extra coverage on something that you don’t think will last more than a year anyway.
Do you purchase the warranty every time you make a purchase or do you have tips for deciding when a warranty is a wise investment? I’d love to hear!
Need more resources to help you save money and spend smart? Check out these books by my favorite financial adviser:
Excerpts from this article first appeared in the print edition of the Advocate Messenger, Danville, Kentucky 8/23/15.