| Doris Dobkins is the publisher of $mart Money New$. You can subscribe by
visiting her web site at
CreativeFinances.com |
Have
you ever wondered why most companies offer extended warranties
(service contracts) for the products they sell? Do they already know
that something is going to go wrong with your product or do they
know everything will be well with it and they are just looking for
easy profits?
Personally, I like to categorize
"extended warranties" as an upsell.
Let's pretend you've just spent three
days searching for the perfect dishwasher. It has more features than
you'll ever use. You bargained for the best price known to man and
you are ready to make the purchase.
Then comes the upsell. "For
$99.00 more, we'll warranty that dishwasher for you for three years
and it will take care of all parts and labors," says the
salesperson.
The pressure is on now. What if I say
no and something breaks down? But I just spent three days
negotiating the price and I'm saving about $99 from my efforts. Now
they want that money back in exchange for a service contract. Oh,
what should I do?
If this has ever been your dilemma,
read on:
 With most appliances and particularly
electronic items, defects will show up before the original warranty
expires. After that time frame, and during the service contract,
most repairs cost less than the service contract. Once the contract
expires, you'll find that once again, the more expensive repairs
will occur.
Now if the retailers know this, why
does the sales force push so hard to make the contract sale? I'll
tell you why! It is because there are huge profits and sales
commissions in these service contracts.
Retailers and manufacturers have
spent considerable time researching their products and know for the
most part, what components break down and when. With this important
data, they can price the service contracts and terms accordingly to
maximize their own profits.
Whatever you decide to do when being
offered a service contract, at least make an informed decision and
ask these four questions:
| 1) |
What is the original warranty time
frame? |
| 2) |
What does this warranty cover? |
| 3) |
What does the warranty
not cover? |
| 4) |
How much does the additional service contract cost? |
If you get answers to the above
questions, you'll at least be able to make a more informed decision
and hopefully the right one for your family and your finances.
--End--
| 
