If you’ve ever purchased a product like a computer or a TV, the salesperson probably gave you a sales pitch for an extended product warranty. These warranties give you additional protection if something breaks after the manufacturer’s warranty expires. They can also cover issues that the manufacturer doesn’t.
While the added protection of an extended product warranty can come in handy, the cost can be very high. Product warranties are typically very profitable for retailers, who train salespeople to sell them aggressively. If the benefit isn’t worth the cost, never let a salesperson talk you into buying something you don’t need.
Consider the following to know when you should purchase an extended product warranty:
Look at the price of the warranty versus the price of the product. If you spend $100 for an MP3 player and the extended warranty is $40, that increases the price 40% for a relatively inexpensive product. However, spending $150 for a warranty on a $2,000 computer may be worthwhile, since it has many expensive parts that could break.
Consider the likelihood that you’ll need extra coverage. Will you use the product on a daily basis or in an environment where it could be damaged easily? Does the manufacturer have a reputation for making quality products?
Understand the coverage provided. Does the warranty simply duplicate what’s already available from the manufacturer, and how long does it last? What about parts and labor? Are the rules of the warranty clear and do they make sense for your situation? If the coverage is thin or it’s too difficult to file a claim, then the warranty would be useless.
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Remember coverage offered by your credit card. Many credit cards offer built-