2017-03-15 00:00:00 Operations English Figure out if you should spring for the extended warranty on your business's next purchase, depending on the type of product and its... https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/06/Boutique-Designer-Works-Out-The-Details-Of-Her-Warranty-Policy.jpg https://quickbooks.intuit.com/ca/resources/operations/knowing-when-warranty-is-worthwhile/ Knowing When the Warranty's Worthwhile

Knowing When the Warranty’s Worthwhile

2 min read

It’s a common question anytime you purchase a big ticket item for your business: “Do you want to get an extended warranty with that?” If you haven’t thought about the topic beforehand, then it can be difficult to decide at the last minute. Whether the warranty is worth your money depends on what you’re buying, your plans for the item, and the coverage that it already has.

Comparing Coverage Options

You only get value out of an extended warranty if the product requires repairs exceeding the cost of that warranty during its coverage period. One year is a common length of time for a manufacturer’s warranty, whereas an extended warranty often provides an extra three or four years of coverage. But if you make the purchase using a business credit card, the card issuer likely already provides an additional year of coverage, so it’s smart to use business credit cards for these types of purchases. With one year of protection through the manufacturer’s warranty and another year through your credit card, an extended warranty may be unnecessary.

Product Reliability

It’s always better to invest money in reliable products that are less likely to break so you don’t need to spring for the extended warranty. Certain types of products break down more than others, though. If you’re buying a TV for your office’s meeting room or rec room, that’s unlikely to break down in the first four years. Customers who purchase laptops, on the other hand, tend to need tech support or repairs within those first few years, so an extended warranty could prove useful. Research the product you’re purchasing to determine how likely it is to need repairs during the extended warranty period, and how much those repairs cost on average.

Intended Use

How much use do you expect to get out of the product? If you’re buying something that your business is going to use every day for years to come, then an extended warranty is worth the money. For example, if your business sells personalized products with engravings on them, then you need to make sure that your laser engraver is covered. A smartphone that you’re going to upgrade in two years might not need an extended warranty, because you can already get two years of coverage by purchasing it with your credit card. If you’re hard on technology, or if your phone is imperative to your daily business, you might want to invest in the warranty. When in doubt, you can skip the extended warranty, just make sure that your credit card covers an extra year of warranty protection. Most high-quality products aren’t going to break down during the time period that the service plan covers, and even if they do, repairs often don’t cost much more than the extended warranty would have. Extended warranties are a big money maker, which means they tend to benefit the company selling the warranty, not person buying it. Unless it’s a crucial item that is going to receive heavy use, you’re better off saving your money.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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