“An extended warranty is one of those common end-of-sale add-ons almost everyone is familiar with,” says. Geoffrey Morrison of cnet.com. “However, dig a little deeper and you'll find that extended warranties are almost always a waste of money,” he concludes.
In this article, Morrison’s alluding to TV sets. He explains that most factory warranties on TVs cover one year on parts and three months on labor. When it comes to extended warranties, he cautions, it’s important to check what they don't cover.
Is the cost worth it? Since most extended warranty plans are in the 10 percent range of the total price, they seem cheap, cheaper than replacement, for sure. Still, Morrison says, most of the major problems you might encounter with a TV you're going to see in the first 30 days, which is well within the return policy of most retailers, and of the problems that might manifest after the first 30 days, the majority of them will happen within the first year (when you're covered by the manufacturer).
Warranties are just insurance for your TV, Morrison observes. “However, if you're on the fence about extended warranties, just know that you're probably better off saving the money,” he concludes.
Are decisions about warranties on furniture, appliances, and cars too insignificant for us to spend time discussing with our financial planning clients? Hardly, especially after one of our very own team members got “burned” buying an extended warranty on her new couch, thinking stains and tears in the fabric would be covered. Turns out, her warranty covered only stains that happened during one event. The definition of “one event”, she learned to her dismay, was one spill, not one party!
Even more important, at Worley Erhart-Graves, we know that an important building block in any financial plan includes trimming everyday expenses and prioritizing the ways you spend your money. If there is just barely room in the budget for that new appliance you need, it’s worth thinking twice about adding $100 in cost for each $1,000 you’ve allowed for that purchase.
Giving thought to each spending decision is never a waste of financial planning time!
Content was prepared by a freelance journalist on behalf of Worley Erhart-Graves Financial Advisors