When Should You Pay for an Extended Warranty?

kathryn by Kathryn Hawkins on September 27, 2011
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Computers and other electronic gear can be expensive — especially if they’re out of warranty when something goes wrong. But is paying extra for an extended warranty when buying new business equipment really worth it? Or are you better off taking your chances? Before plunking down the extra cash, consider these questions:

Does your credit card offer free extended warranty protection? Before agreeing to your cashier’s offer of an extended warranty for an extra fee, look into whether any of your credit card providers offers a free warranty upgrade or extended buyers’ protection. Find out what’s required to take advantage of this: Generally, you simply need to save your receipts, but you may also need to register the product with your credit card provider. Call your card’s customer-service hotline to get the details — and then compare them with those of the store’s plan. If there’s nothing worth paying extra for, decline the cashier’s offer.

How likely is the product to break down? Research whether or not your new purchase is likely to break down after the manufacturer’s warranty ends. After three to four years, just 6 to 8 percent of TVs are in need of repair, according to a 2006 Consumer Reports study. If you buy a laptop computer, however, your chances of needing tech support go up to 43 percent, so you may want to spring for the extended service plan (particularly Apple’s top-notch AppleCare plan, which also provides in-person tech support).

How long do you plan to use the equipment? If your office relies on being state-of-the-art, you may be ready to resell a product before its extended warranty expires. In this case, you may save money by opting out of additional protection even if your credit card doesn’t cover the product. Before you do, find out whether the extended warranty or tech-support program can be transferred to a new owner: If so, it may help you resell the equipment at a higher price when you decide to upgrade.

How much does the plan cost compared with the product’s price? An extended warranty is a form of insurance for your new purchase. As such, it’s important to consider the cost to replace your equipment and assess whether paying for a service contract is a worthwhile investment. If the item you’re purchasing costs just a few hundred dollars and the extended service plan costs $50 a year, you’re probably better off saving your money for a replacement model. On the other hand, if your purchase costs several thousand dollars, it may be worth spending a few hundred to protect your investment.

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