Beyond The Sale

Beyond The Sale

Read fine print, consider costs to determine if a

service contract or extended warranty is right for you.

A Better Business Bureau national survey conducted by Kelton Research in 2007 found that 42 percent of Americans admit they do not look at extended warranty policies that come with their purchases. Forty-six percent of the consumers surveyed do not read service contracts.

Extended warranties and service contracts for electronic and other products mean big money for retailers. Generally, the profit margin on the products themselves is slim, perhaps only a few percentage points. However, the margin on extended warranties can be 50 percent or more.

To make sure you get the most out of the deal, the BBB offers advice to help you decide whether you need to purchase an extended warranty or service contract.

Only you can decide if an extended warranty or service contract is worth the cost. Consumer Reports found that with a few products, such as computers and plasma TV s, extended warranties are a good safety net. The extra coverage can provide you with peace of mind.

Though salespeople often use the terms "extended warranty" and "service contract" interchangeably, there is a distinction. An extended warranty is typically designed to protect you against manufacturing defects beyond the life of the manufacturer's express warranty.

A service contract, however, provides varying degrees of maintenance and upkeep as defined in the contract.

An extended warranty offers protection if your computer inexplicably stops working; a service contract might protect you if you spill coffee on your keyboard. Then again, it might not.

Read the policy closely

As with any contract, you want to read the fine print of the manufacturer's express warranty and the extended policy. Usually you can take the policy home to read it closely and sleep on the decision. Many extended warranties and service contracts don't have to be purchased at the point of sale and can be purchased at a later date.

Know what you are getting

Make sure that you do not duplicate coverage. Some protection may already be in place for a specified time under what is known as "implied warranty" depending on state laws.

If you pay with a credit card, you might be eligible for an extended warranty through your credit card company.

Shop Around

Different retailers offer different policies. If an extended warranty or service contract is important to you, visit several retailers and find out which offers the best value.

Run the numbers

When pondering the purchase of an extended warranty or service plan, consider the cost ratio of the policy and the product. It really is not worth paying $50 for a policy to cover a $120 DVD player.

You also should calculate what it would cost for average repairs durring the period of the contract, and compare the repair costs to the total cost of the service contract.

If the product has a good track record for reliability, the service contract could end up costing more money than it's worth.