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Service Contracts and Extended Warranties

When you purchase a product like a television or a computer, the dealer will often attempt to sell you a service contract or extended warranty. If you have a problem with the product during the term of the contract or warranty, the dealer promises to repair the product at no extra cost to you. It is also possible to purchase a home warranty that covers the possibility of discovering hidden defects in a home you purchase.

You may decide to purchase the contract, just to give yourself piece of mind, but there are a few aspects to consider. The price of the contract is usually very high in terms of the likelihood the product will need repairs. What this means is that if you make a habit of refusing service contracts on all your purchases, you will pay less over the long run even if now and then you need to pay to get a product fixed. In addition, many products like computers and electronics become rapidly obsolete, meaning that when they break down you often would want a new model and not a repaired old model.

Bear in mind that nearly all appliances and electronic products are covered by free manufacturer’s warranties of 90 days, a year, or even longer. If the product does not work when you take it home, you have protection. In many cases, the additional coverage sold by the dealer is a poor investment.

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