Debt Free

For many people, warranty coverage is a major determining factor for many of the purchases they make. After all it only makes sense that when comparing two competing, but very similar products, the one with the better warranty could well come out the winner. That’s why you really need to know what the warranty really covers, because it’s not always as it seems.

The first thing you need to be aware of is the ubiquitous ‘limited warranty’. That means just what it says, the coverage doesn’t extend bumper to bumper, top to bottom, or forever. It’s up to you, as a consumer, to determine exactly what the limitations are, something many consumers are loathe to do, given all the extremely fine print contained in most warranty descriptions. You, however, should not be among them, especially on major purchases, such as appliances, big screen TVs, vehicles, roofs, and even entire new homes. Seemingly minor differences in warranty coverage could dramatically affect how the manufacturer or builder stands behind their product, and more importantly, how much money you could have vacuumed (be sure to check the coverage on those too) from your bank account to pay for repairs. Remember limited means just that and something you may take for granted as being covered, may, in fact, not be.

One warranty clause you should be aware of on vehicle warranties, especially extended ones purchased for used vehicles, is the phrase “internally lubricated parts”. This is a common clause in such warranties. It means that parts lubricated by the internal oil supply of the transmission/differential/transaxle and/or engine are covered, but there are some other important parts and pieces that comprise the power train of the vehicle, and you could be stuck picking up the tab, should one of them break. These include (possibly expensive) parts such as wheel bearings, CV joints, drive shafts, and U-joints. Such things may be covered, but the chances are you’ll be paying for them if your extended warranty includes the ‘internally lubricated’ clause.

Another clause to be aware of is the term “normal wear and tear”. This could be construed as almost anything, depending on who is doing the evaluation, so be aware of this, but typically it refers to things such as clutches and brakes on vehicles and batteries on laptop computers for example. If you are unsure, ask the company for clarification.

If you are buying an extended warranty, make sure when the thing goes into effect. Some start covering the product from the date of product purchase, others kick in on the day you buy the warranty. Read the terms carefully to be sure. You could be purchasing the warranty weeks or months after you purchased the product, it’s up to you to decide if the dates are important to you or not. A similar clause applies to extended vehicle warranties when it comes to mileage. If the warranty states the coverage is for “5 years or 100,000 miles” for example, you need to make sure if that means 5 years or 100,000 miles from the date you purchase the warranty, or when the vehicle reaches 5 years old or 100,000 miles on the odometer. It’s often the latter. Needless to say, this could dramatically affect your coverage.

Another problem with extended warranties is the viability of the company you purchase them from. This includes store brand warranties, not just warranties from warranty companies. If you bought electronics from Silo or Pacific Stereo in the 1980’s you know what I mean. These companies seemed large and viable, then POOF! They were gone. No company, no warranty. Manufacturer’s warranties are less troublesome in this regard.

If you purchased an extended vehicle warranty from Warranty Gold, Pro Guard International, or Smart Choice, you know all too well that those extended vehicle warranties can become worthless overnight if the company that honors them goes bankrupt. It’s incumbent upon you, therefore, to carefully research the background of any extended warranty company before you purchase. Look into their financial viability and their history. You sure don’t want to spend $1,500 on an extended warranty, only to be unable to file a claim.

Sometimes warranties are simply not worth the cost, in many people’s opinion. This especially applies to some consumer electronics products. Why in the hell would anyone buy an extended warranty on a VCR or DVD player, for instance? Much to the chagrin of your local electronics repairman, you can buy a brand new one for well under $100, and many times it’s better than the one your spent $300 for 5 years ago. You need to do a cost benefit analysis before purchasing any extended coverage.

Buying a warranty is purchasing an insurance policy against failure. You are hedging your bets that your shiny, new product may, indeed fail at some point. What are the odds that it will? Do careful research on the reliability of what ever product it is that you’re purchasing. If the results bear out the need for a warranty, then consider its purchase, otherwise stick the $1,500 in a nice mutual fund that will generate you a healthy return. If the darn thing breaks, use the money for the repair or replacement. If not, you’ve got another little nest egg.