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Extended Warranties: Sensible Insurance or Waste of Money?

Extended Warranties: Sensible Insurance or Waste of Money?

Overview
  • An extended warranty is a guarantee of a product under conditions of ordinary use, and covers a period after the standard, free warranty expires.
  • Extended warranties are usually highly profitable for retailers and a waste of money for consumers.

Main Cons
  • Extended warranties are expensive, at approximately 10% of the purchase price per year of cover.
  • Repairs typically cost about the same as the warranty.
  • Covered parts seldom break within the extended warranty window. Most faults occur within the first year, which is covered anyway.
  • For most businesses, keeping a couple of spare laptops in the office will cover the business continuity side of laptop or desktop computer failures.

Main Pros
  • If warranties offer a true business continuity advantage – not just replacement parts – at a fair price, and uptime is critical, then they are worth considering.
  • If you can negotiate a great price, or the warranty really offers a good deal, go with it.
  • Features to look for are on-site service, guaranteed response times and advance replacement.
  • Laptops that travel a lot and certain PCs might be worth covering, but laptops are likely to need additional accident cover.

If You Buy: How to Get the Best Value
  • Negotiate on price and shop around.
  • Consider third-party warranties.
  • Don’t pay more than 10% of the purchase price per year of warranty.
  • Make sure the extended warranty doesn’t overlap with the 1-year manufacturer’s warranty, effectively providing a year less cover.





Extended Warranties Sensible Insurance or Waste of Money - To learn more about this author, visit Linda Jacobson's Website.

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About The Author


Linda Jacobson
(Visit Linda's Website) Linda Jacobson is Partner and General Manager at Nash Networks Inc. We provide computer support and managed IT services to businesses in Toronto and the GTA. Our clients are usually from 5-50 employees and often have complex IT needs and low tolerance for downtime. We manage several mixed Windows, Mac and/or Linux or UNIX networks. We are producing a series of articles in 2009 to educate business owners about IT, with a focus on costs, productivity, and cost-effectiveness. The series is titled, "Making every IT dollar count!"

Linda Jacobson is a Gold author on EvanCarmichael.com
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