4 Brilliant ways stores trick you into spending money.
Don't be fooled into leaving with less money in your pocket.
The Extended Warranty
Long story short: If it covers physcial damage and its at risk of being
damaged, then yes. Most other situations, no. Apple care: yes. yes.yes. $300 to
cover a TV for two years? NO. Heres the pitch with a realists view. You walk up
to the counter to buy your new item, the sales person pitches that the item will
be covered by them if it breaks during normal usage, which does NOT include
dropping, smashing, etc. Most manufacturers cover these types of defects for a
year or two anyway and if theres an issue, likly you will know in the first 30
days which most stores return policy covers. By buying this warranty all you are
doing is saving a little extra hassle by calling the manufacturer and getting a
replacement if it breaks. I've paid for the extended warranty or "insurance" in
the past and when it did break, I always had a hard time collecting my new
replacement item. Usually, my claim was denied because of some loophole they
didnt explain in the 10 second sales pitch by the cashier when I bought the
item.
The extended warranty or insurance is a great money maker for retailers because
most times, people arent going to collect, so your are buying something with
vertually no overhead. So if they lump in the amount of claims vs. the amount of
sales they come up on top and its very profitable. Or else, lets face it, they
wouldnt offer it. One study showed that profit margins for retailers were as
high as 70% compared to only 10% for the products that they cover and only 8% of
products filed claims.
Personally, I don't see the problem with the offering, I think it's great for
stores to have it available. However, the salespeople of some retailers are
required to maintain a quota of extended warranty signups, so at time, the pitch
can get quite pushy. So when making the decision, dont be spontanious. These
days, products have alow failure rate, so when it happens, its either early on,
when you can return it, or way later after both manufaturers and extended
warranties and expire.