Extended warranties? Extend your savings, instead.

OK, so you’re at the mega-mart grabbing the latest must-have gizmo. You’ve made it to the checkout line and … squish. That’s the sound of anxiety squeezing your heart as the friendly salesperson unleashes the dreaded “what if” sell. What if it breaks? What if you need to come back in 3 months? The friendly sales gal’s proposed solution? Extended warranty. Our take? Don’t buy it. Sometimes they make sense, but more often the risk/reward odds are stacked in your favor.

Of course, when it comes to a big ticket item—like a new fridge or computer—you’re going to have some nagging doubts. So how do you squash those “what-if” fears? The Consumerist says you and a savings account are the best cure against any gizmo malfunctions. Instead of forking over extra bills for a warranty that isn’t ABSOLUTELY necessary, park those funds in a savings account and rename that account “Oops, it broke.” Think you’ve got a better nickname for a savings account? We’d love to hear it. And tell us your thoughts on extended warranties and those nagging “what if” scenarios.

http://honeyandlance.com Honey

You could always scare the out of them and say, “well if you’re that confident that you’re stocking products that are likely to break in such a short time frame, then I guess we can cancel the sale and I’ll make my purchase from a store that stands by the quality of their inventory.”

Ha!
Anonymous

For those purchasing with Visa Signature & American Express cards, you are entitled to extended warranty periods underwritten by the card authority.
Careful Saver

Read in Dutch News that ING will sell ING-Direct. TIme to remove funds?
We, the Savers

@ Careful Saver: Your savings are just fine. It’s business as usual at ING DIRECT. We’re still Orange, still as safe as Fort Knox and still committed to delivering a terrific Customer experience. Thanks for checking in.
http://www.BoostGear.com BoostGear.com

Great article. Straight up answer!
http://www.firstsavingsonline.com Joboo

Generally speaking, if a sales person is pushing an extended warranty I become less confident in the item i am purchasing. Sometimes it does make sense to purchase an extended warranty; example: purchasing a vehicle, or some other large ticket item.

I whole heartedly agree with placing the money that you would have spent on the extended warranty in some sort of savings account and adding to it as you can.

If you feel an extended warranty is needed why would you want to purchase the item?
nathan

i feel like this is bad advice. For instance, say you buy a computer (i will use my macbook as an example). you can triple your warranty for ~$250, making it a 3 year warranty compared to just 1 year. Now, computers often have individual parts malfunction, which is quite common with most electronics. This doesn’t mean that it is made poorly, sometimes you just get unlucky. Therefore, in 3 years, your computer’s screen might black our unexpectedly or your hard drive might crash or any number of things. This means for the tiny $250 (relative to the initial $1700), you are guaranteeing that you won’t have to spend another $1700 within 3 years. I don’t understand why people are agreeing with the author of the article?
We, the Savers

@Nathan Sometimes warranties make sense – it’s up to you to decide what’s an acceptable (i.e., affordable) level of risk. All we’re saying is if you’re putting money away on a regular basis, chances are pretty good you’ll have enough set aside to fix (maybe even replace) whatever breaks. And with a little luck, you’ll never need to do either. Thanks for sharing your thoughts.
http://moneyreallymatters.com Vijaianand

I follow the same idea since 2006. INGDIRECT made it easy to open saving account in seconds. So I have 3 saving accounts specifically to handle these problems. I have Car-HomeMaintenace savings, Short Term savings and OTHER Savings account to cover any unexpected expenses. I put monthly $50-100 in it and forget about it. Last month, I had to repair my truck. I don’t have to worry about any credit card bill. I just took that expense out this savings account and managed it pretty well. These savings logic can come real handy. Start saving, make it an habit. It is not an hobby. Check out more at my blog site, http://www.moneyreallymatters.com.
http://experienceaurie.wordpress.com Aurie

My name for that savings account would be called: “See wah had happened was?” Hopefully ING allows me to have a long tagline. If not, I’ll abbreviate. I am working towards having just such a fund for my 5 year old car which I have been diligent about keeping in tip top shape.