Are extended guarantees useless?

Many products today are highly reliable and are unlikely to need a major repair, or even a small one, before you want to replace them. And with technology changing so rapidly for cars, computers, and many other items today, replacement time can come faster than you think. Extended Warranties Are Rarely Worth Your Money. Products don't break on their own, and when they do, the price of repairs is usually lower than what you would spend on an extended warranty.

When you buy an extended warranty, you are placing a bet. Your bet is that ultimately your car will require more repairs than the cost of warranty. The guarantee provider is also placing a bet. The guarantee provider's bet is that your car will not require repairs other than the cost of the warranty.

One of you will win the bet and, considering the number of extended warranty providers out there, it seems that the odds are not in your favor. However, keep in mind that most of the time you can negotiate the price of an extended warranty. Extended warranty contracts are loaded with small print. It is essential that the consumer read this fine print and understand what is covered by the warranty and what is not covered by the warranty.

A warranty provider worthy of your business will provide a potential customer with an exclusion list, which will list in detail parts, systems and repairs that are not covered by the extended warranty. Be sure to review a list of exclusions before purchasing any extended warranty. Consumers who choose a third-party extended warranty that is not backed by the car manufacturer can find a short list of approved facilities that can perform covered repairs. If the vehicle breaks during a trip, or if you move to a different region of the country while the warranty is in effect, such restrictions may make the warranty worthless.

Buying an extended warranty is risking. You could pay a lot of money for protection and never use it. It would be better to take the money you would spend every year and set it aside for repairs. An extended warranty covers repair or replacement costs for an eligible appliance when something goes wrong.

Even the most generous original warranties provided by car companies expire after 10 years or 100,000 miles of driving, while many last only 3 years or 36,000 miles. Today's appliances are rugged machines and it's very likely that you'll never use their extended warranty while it's in effect. Most extended warranties require purchase as long as the original appliance warranty is in effect. Today, consumers maintain their cars for longer periods of time than ever before, and because new vehicles are loaded with complex technology and electronics, an extended warranty can be attractive.

Extended warranties will not help you if they are valid for five years, but your machine breaks during the first year (when it is covered by the manufacturer's warranty) or the tenth year (when all warranties have expired). On top of all that, dealers don't always respect extended warranties, and most of the money from them goes to a dealer's commission, not a vehicle social insurance program. Some insurers may only offer one- to two-year warranties, which may be in line with the manufacturer's warranty and render the extended warranty useless. Once you consider how many extended car warranty companies exist, you have to admit that the odds are not in your favor.

We'll explain the types of extended car warranties you can opt for and discuss why you might want to avoid these deals. While extended warranties may pay off for larger appliances that cost thousands of dollars to repair, they make less sense for smaller or more affordable ones. Consumer Reports describes extended warranties as sources of revenue for its suppliers because they bring much more money than is paid in claims. In addition, home warranties generally cover appliance repairs, and homeowner's insurance pays for any covered losses.

With 47% of consumers opting for an extended warranty for their car, you may be wondering if this protection is right for you. . .

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