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Are extended warranties worth it?

Are extended warranties worth it?

After convincing you how sturdy the laptop is, salespersons try convincing you of the value of an extended warranty. We break it down to tell you if it’s worth it.

In the same pitch, the best of salespersons can convince you of a product’s high-quality and then sell you an extended warranty. At that moment, it could seem like the way to go. After spending Rs50,000 on a TV, the price of the extended warranty might seem small. But that’s not all there is to it. We tell how to the ‘ifs and buts’ that should cross your mind before you decide to spend that extra bit of cash.

What is it?
An extended warranty is a warranty, provided either by the store or the manufacturer, after the standard warranty expires. Like any service of this kind, it comes with lots of fine print. Most extended warranties will only cover specific problems, mainly electrical and mechanical. In case of wear and tear, accidental damage and power surges, you’ll need to pay for repairs yourself. If damage is irreparable, you’ll need to make the replacement yourself; the service agreement only covers repair, not replacement.

What does it cost?
The cost of having an extended warranty can range between 5-20% of the price you pay for the product itself, depending on the length for which the item will be covered. For example, you could buy a 42-inch Sony Bravia (Rs82,900) with a two-year extended warranty for Rs5,000. On a Dell laptop worth Rs94,000, you can buy a two-year extended warranty for Rs21,418. So they don’t exactly come cheap. Here are prices for extended warranties across various price points.

Company Product Price Extended Warranty Period Extended Warranty Price % of MRP
Sony Bravia Rs82,900 2 years Rs5,000 6.03
Sony Vaio Rs28,410 2 years Rs2,490 8.76
Ezone LCD TV’s Above Rs60,000 2 years Rs5,590 9.31
The MobileStore Mobile phones Rs15,001 – Rs25,000 1 year Rs500 3.33
Ezone LED TV’s Above Rs60,000 2 years Rs6,790 11.31
Ezone Laptops Above Rs60,000 2 years Rs8,690 14.48
The MobileStore Mobile phones Rs25,001 – Rs35,000 1 year Rs700 2.8

*Prices correct as on May, 2014.

Will it breakdown?
If you’re considering an extended warranty, you’re assuming the damage your product will face will not be excluded by the fine print. You’re also assuming that the damage will be so large that it’s costlier than the extended warranty itself. So how likely is it for this to happen? According to US-based Consumer Reports, “Products seldom break within the extended-warranty window–after the standard warranty has expired but within the typical two to three years of purchase–our data show.” While certain brands may be more likely to fail than others, it’s not unreasonable to think that the cost of the extended warranty will be more than what it costs to repair the product. Also remember that you’re paying today for a warranty that will kick in over a year later and you might only need 30 months later (how about setting up a repair fund in an FD instead?).

Reasons not to get it
1. Products don’t usually breakdown during the extended warranty period
2. If the item you’re sold is faulty or has minor glitches, this will be covered by the manufacturer’s warranty anyway
3. The bill for repairing the product is unlikely to be as much as the cost of the extended warranty

If you’re planning to buy one anyway, however, keep this in mind when you do:

Ensure there’s no overlap
In most cases, extended warranties become active after the factory warranty expires. But in some cases, extended warranties start after a particular timeframe. For example, if your extended warranty kicks in after two years and your product comes with three-year warranty, the third year will be covered by two warranties. Instead of paying for two services and getting protection only from one, check if you can postpone the extended warranty to kick in after your manufacturer warranty expires.

Who will repair it?
If you’re going to pay so much, at least find out you’re not going to be inconvenienced when you need to use it. Most extended warranties provide live service at your home in case of a glitch, but if the problem is severe, it will have to be shipped to the manufacturer. Not all manufacturers will have a certified service station where you live. If you live in Mumbai and the nearest station is Gurgaon, you’re going to be without your TV or laptop for longer than necessary. In case of a major problem, you’ll also have to pay for the item to be shipped to the service centre.

Replacement clause
Ensure that there’s a clause in the agreement that entitles you to a replacement or refund if the item keeps breaking down. If there is one, you will be entitled to the original cost of the product, though a replacement is more likely.

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