You buy some high-end television or smartphone after mulling it over for weeks, and then you have about 15 seconds to consider buying what amounts to an overpriced insurance policy on it.
When prompted, do you usually sign up for an extended warranty?
Many do, of course, even though consumer experts have long recommended against buying extended warranties, a high-margin profit centre for retailers.
Most products don’t break down within the warranty period and even when they do, repair fees generally end up costing the same as money you shelled out, they maintain.
As well, sales staff regularly mislead customers when they sell extended warranties, according to a recent BBC report. And, if these folks are to be believed, the same thing happens on this side of the ocean.
Truth is, buying a warranty his isn’t really a financial decision at all — it’s about regret, which is a very uncomfortable feeling that we all try to avoid, says Dan Ariely, author of Predictably Irrational.
And because we want to prevent that feeling, we’re all too willing to do something that’s actually not that financially wise. Most of us simply want to know that we won’t have to worry about this down the road. And as a consequence, we often pay too much money for that solace, he maintains.
If you’re the type that might sleep easier thanks to the additional peace of mind an extended warranty might offer, go right ahead. But at least understand why, he suggests.
Do you generally buy extended warranties? Using what criteria? How have things worked out?
