When you go to buy that fancy new digital camera, such as the Canon Digital Rebel XTi pictured above, no matter whether you make the purchase at Best Buy, Circuit City, Fry’s Electronics, or any other store, chances are pretty good that the sales associate will try to talk you into buying an extended service plan or an extended warranty of some kind.
Since these companies are operating on razor-thin profit margins, cut even smaller by the rise of Amazon.com and other big internet sellers, most electronics brick-and-mortar stores struggle to remain profitable, and therefore compensate their sales staff heavily to promote the sale of extended warranties. These extended warranties rarely have claims made against them and almost always translate into pure profit in the companies’ financial reports. It’s kind of like when you go to your local movie house and spend big dollars on refreshments; that ten dollar tub of butter-flavored popcorn is how your local cineplex stays in business.
There are lots of horror stories on the internet of consumers having their items lost by a store’s service center or returning an item a number of times before it was properly repaired. In general, Consumer Reports and other consumer advocates have advised consumers for years to avoid spending additional money on an extended service plan. Since most needed repairs occur within the manufacturer’s stated warranty period anyway, the typical extended service plan will not give you any additional protection. These days, many credit card companies also provide additional protection plans for their customers’ purchases. Furthermore, many consumers are able to cover loss or damage of their major electronic purchases through their home insurers. So before even considering buying an extended service plan from a store, it’s important to have a good understanding of what exactly the manufacturer’s warranty covers, how long it lasts, and beyond that, what other protection may be available to you outside of purchasing an extended service plan or warranty.
That said, there are probably some rare instances where an extended service plan will bring additional peace of mind and when a case can be made for either buying one or strongly considering it. For example, if you’re making a significantly large purchase or purchasing a new technology without an established reliability track record, an extended warranty can provide you with some indemnity in the event that you run into trouble outside the manufacturer’s warranty period.
If you do decide to purchase an extended service plan, take the time to read the fine print to make sure you understand exactly what you’re buying. Make sure you clearly understand who exactly will be doing the work both in and out of the manufacturer’s warranty, what is and isn’t covered, how long the typical repair will take and whether you’ll have access to another camera while yours is in the shop (typically, you won’t). Also, keep in mind that most plans do not cover accidental damage.
Keep good records. Make sure you have your warranty information available in a safe place. Remember: when it comes time to make use of your plan, if the store can justify not honoring the contract and not making the repair for any reason, they will.
Recommended for further reading on this topic: “What Consumers Should Know About Extended Warranties and Performance Service Plans for Electronics”.