Do you ever get the feeling that every time you buy a product, whether it’s at a retail store checkout line or when shopping online, that the company is trying to upsell you on a retail warranty?
I’ve noticed this trend lately.
Whether it’s a big-ticket item like a TV or washing machine or a new smartphone or even smaller purchases, it seems like retailers are trying to push people to buy more product warranties.
I once read and even heard a friend say, that some companies make more money selling warranties then they actually do selling the actual product. However, I wasn't so sure if that was true.
This led me to ask, are warranties really worth it? And, are all warranties the same?
Let’s look a bit more closely at some of the biggest retail warranty myths – and how you can make better decisions when you buy to avoid getting upsold on something that may not necessarily be in your favor.
What are retail warranties?
Retail warranties are also sometimes called extended warranties or “protection plans.”
They are a form of insurance that a buyer can purchase to help cover the costs of repairing an item in case it breaks during a certain period of time.
The promise of warranties is this: if your product breaks, you can get it fixed. Or sometimes get a new one.
Anyone who’s ever dropped and cracked their expensive iPhone will understand the feeling of relief that comes from realizing that your phone is still fully covered under warranty if you have a protection plan like AppleCare.
The same is true for fitness equipment, which has experienced a boom since COVID-19: if your treadmill breaks down while it’s still under warranty, this can potentially save you hundreds of dollars in costs.
But here’s the problem: a lot of big-box retailers are pushing customers to buy overinflated warranties on all kinds of products. And the truth to the matter, is these retail warranties often are not a very good deal for you as a consumer.
If you’re not careful, you might end up in a situation where you’re paying too much for a warranty that won’t really help you if something breaks.
Check out this list of…
>> Related, 17 Weird Ways to Save Money (like avoiding warranties).
4 Biggest Warranty Myths…and Realities
Myth 1: You cannot buy a warranty for refurbished or used products.
Reality: Buying a previously owned product does not mean you are not eligible for a warranty. In economic hard times like now, it can be a smart money move to buy used or refurbished, and doing so does not mean that you cannot get coverage.
For example, instead of breaking the bank for a brand-new smartphone, laptop or fitness machine, opt for a used or refurbished model which can provide you hundreds of dollars in savings.
Here’s the difference: A used electronics device is essentially being sold as is, with a restored software experience.
It generally falls on the seller to provide images of the device, so you can see if it has any scratches or cosmetic issues. The listing should also say if there's a feature that doesn't work, like a cracked screen or foggy front facing camera.
A refurbished device, on the other hand, has gone through diagnostic tests to make sure it meets the standards for sellable condition. In some cases, these might be returned phones, laptops, treadmills etc. that were broken and have been repaired.
An additional factory-refurbished warranty might be included, depending on where you get it.
However, regardless of whether you take the “used” or “refurbished” purchase route, make sure you find a warranty to extract the maximum value out of your electronic product/device. (Buying refurbished is a way to save money, but always be diligent!)
The best warranties to look for are ones that include accidental damage like coffee spills or summer pool mishaps on top of manufacturer protections.
Myth 2: Warranties will cover everything.
Reality: Most warranties are full of loopholes and exclusions that can keep you from getting your money back. There’s not a lot of transparency from retailers about what is included (or not) in your warranty.
For example, according to Consumer Reports, you need to be sure to read the fine print before you buy a warranty. The coverage might not be as generous or all-inclusive as you expected. Warranties often will not cover accidental damage, or will exclude paying for repairs for customers who have not done routine maintenance on their products.
Some warranties might also require you to pay a deductible or share the costs of repairs; the warranty might not cover 100% of the repair costs.
Myth 3: It’s easy to file a warranty claim.
Reality: If you want to actually file a claim on a warranty, good luck! Retailers make the process very difficult and the whole situation is stacked against the consumer.
Even if you’ve saved all your paperwork and you’re successful in getting approved for warranty-covered repairs, there are still a lot of ways that this situation can be difficult and time-consuming for you:
- What if it turns out that you have to work with one specific repair shop that’s on the other side of town, or in a different city from where you live?
- What if you have to drop off your item for repairs at a particular location that’s not convenient for you?
- What if you can’t get repairs scheduled anytime soon?
- What if the repairs get done, and you’re still not happy with the quality of the work? (According to Consumer Reports, 1 in 5 people who actually get repairs done under an extended warranty are not satisfied with the repair.)
Myth 4: Buying a warranty from the retailer is your only choice. Surrender to the hard sell!
Reality: You have other options when deciding whether to buy a warranty.
We’ve all been there, especially if you’re in a big box retail showroom. It seems like the sales people know just how to put the pressure on you to sign up for the extended warranty – especially at the point of purchase. (Do they get a sales bonus for selling more warranties? Probably. Did you know that the average retailer marks up warranties up to 900%?)
Don’t do it!
You don’t have to sign up for the big-box retailer’s warranty – nor do you have to purchase a warranty the day you purchase the product. You have other options:
- Your credit card might offer a built-in warranty. Some credit card companies will give you built-in extended warranties for free if you use their card to buy certain products. Check the fine print on your cardholder agreement. But beware that credit card companies do not have a service level agreement on repairs, and many consumers have reported difficulties getting service.
- Use Upsie to get a lower-cost warranty. There’s a company called Upsie that offers lower-cost extended warranties on products like TVs, laptops, iPhones and more. With Upsie, you can get the same or better extended warranty coverage that you would get from the store, but at a much lower price. They even offer better protection than AppleCare – who knew! And, the best part is they will even tell you if you shouldn’t buy a warranty; if a warranty isn’t a good deal or the right fit for your latest purchase, they will tell you honestly.
Final Take on Retail Warranties:
Big box retailers are making big profits off of warranties. But don’t fall for the common warranty myths retailers use to get you to buy extended warranties.
Know the facts and make a well-informed decision. Not all products need a warranty and always wait 24-48 hours before making your final decision.
And if you want to buy some additional protection for your latest big purchase, check out new alternatives like Upsie to get lower prices and better transparency on how the warranties work, and whether or not a warranty is a right decision for you.
Josh writes about ways to make money, pay off debt, and improve yourself. After paying off $300,000 in student loans with his wife in less than five years, Josh started Money Life Wax and has been featured on Forbes, Business Insider, Huffington Post, and more! In addition to being a life-long entrepreneur, Josh and his wife enjoy spending time with their chocolate lab named Morgan, working out, being outside, traveling, and helping others with their finances! I got serious with money when I used Personal Capital to track my finances.