Comments on: Create Your Own “Extended Warranty Fund”

By: Matt

Matt — Tue, 06 Oct 2009 23:30:46 +0000

I think this is a good idea.

And it can be used for a lot of things. Like paying extra for accident forgiveness or something like that. 9/10 if you set the extra money aside and save it or even invest it you will come out better.

Companies know this! That’s why they offer all of these gimmicks in the first place. They have already done the math. They wouldn’t give out these extended warranties if they weren’t making money off them.

By: John DeFlumeri Jr

John DeFlumeri Jr — Sun, 04 Oct 2009 11:06:58 +0000

I like to compare the extended warranty to health insurance, which I couldn’t risk being without!

By: Tim

Tim — Tue, 29 Sep 2009 17:14:55 +0000

there are certain things i think it is worth the extra expense for extended warranties, but most aren’t necessary worth it.

if paying buy credit card, also take a look at your credit card benefits. For example, masterassurance through mastercard will double the manufacturer’s warranty, gives price guarantee, accidental damage warranty, etc. certain amex cards also extend warranty.

By: Matt Jabs

Matt Jabs — Tue, 29 Sep 2009 14:05:35 +0000

This is so simple yet so brilliant. I would have to think that those who seem oppose do not fully understand the concept. This shows the inability of the average American consumer to “pay themselves.” They’re so used to paying others… they almost don’t want to stop!

By: st

st — Tue, 29 Sep 2009 03:42:32 +0000

http://www.getrichslowly.org/b.....r-account/

By: Kevin@OutOfYourRut

Kevin@OutOfYourRut — Tue, 29 Sep 2009 00:36:13 +0000

It does sound a lot like an emergency fund, but if it keeps you from buying a worthless or semi worthless extended warranty, it’s well worth the effort.

Anything that lowers expenses, like warranties, and adds to savings, is worth doing no matter how it looks.

Good idea! Most warranties are full of holes anyway.

By: Martin Cohn

Martin Cohn — Mon, 28 Sep 2009 19:45:43 +0000

Just about every gold/platinum MC and Visa automatically double the maunfacturer warranty (up to a year added on) for free. As long as you pay it off monthly this is a decent free alternative to self-insurance. Or at least it gets the sales people to stop with their spiel.

By: BG

BG — Mon, 28 Sep 2009 19:09:24 +0000

I have a friend who claims he got a “free air conditioner” for his house under one of those home-warranty deals. I asked him how much he had paid in premiums to the warranty company over the years: of course totaling it up, he would’ve saved nearly $1000 by NOT having the home warranty and purchasing the air-conditioner outright.

A little thought exercise points out the obvious: the warranty companies always make money, even if they have to pay out — that is their business plan.

I never purchase extended warranties — normally if the item is defective it will fail during the original 1-2 year warranty period. If it fails after that period: that’s why I have a large emergency fund for repairs/replacements. Purchasing extended warranties on computers is insanity: why insure something that is obsolete in a couple of years, especially when the warranty is 30% of the original purchase price?

FYI: I only carry liability insurance on my cars as well.

By: Nickel

Nickel — Mon, 28 Sep 2009 17:24:29 +0000

MichaelK: Valid points. However, I’m a proponent of the view that you should only insure that which you cannot afford. Appliance/car repairs don’t fall into this category, and if they do, then I likewise can’t afford the extended warranty.

By: Corporate Barbarian

Corporate Barbarian — Mon, 28 Sep 2009 16:41:10 +0000

While it’s not an appliance, our cesspool requires maintenance every three years. It runs around $600. I have a weekly budget spreadsheet, and I do a 2-year projection, and this is an item that I budget for. I factor in inflation, and I usually come pretty close to the actual expense. This way, there are no surprises when the drains start to run slow.

By: Sylvia

Sylvia — Mon, 28 Sep 2009 13:58:41 +0000

I’ve never been a fan of extended warranties, but of the few I’ve chosen to purchase, most have been worthwhile, most notably for our washer and dryer. With a family of six, we go through a LOT of laundry, and I’ve had motors, agitators, and heating elements all replaced over the last several years. They’re old enough now that even the extended warranty has elapsed, so I won’t bother repairing them again. I have an “Appliance Replacement” account at ING that I’ve been putting $50 a month in for the past few years, so when it’s time to replace them, I’ll be ready.

By: MichaelK

MichaelK — Mon, 28 Sep 2009 13:50:37 +0000

Although I understand the concept behind “self insurance”, I think you are missing the point slightly. Insuring small ticket items (small electronics, appliances, etc.) is one thing, but the real benefit of insurance (warranties) is for covering the repairs of big ticket items. Lets take the ultimate in warranties: the auto warranty. Auto warranties are about peace of mind. I’d rather have predictible, small monthly payments of $20-$30 per month instead of a onetime hit of $2000. The money may be the same, but its the peace of mind it buys you.

Also, the profit the shops make on selling warranties is irrelevant. I’m sure shops make a killing repairing your broken car/tv/appliance as well.

So I do think treating warranties as purely a monetary transaction is not the point. Its the transferrence of risk and having a predictible model of expenses.

By: Nickel

Nickel — Mon, 28 Sep 2009 12:36:08 +0000

Jo: The only thing better than peace of mind is cheap peace of mind.

By: Jo/GaelicWench

Jo/GaelicWench — Mon, 28 Sep 2009 12:26:04 +0000

I think this is a good idea; I never even thought of using this method to cover a potential “lemon.”

There’s nothing like peace of mind, eh. Thanks for the great tip!!!

By: kev

kev — Mon, 28 Sep 2009 12:25:42 +0000

I do this same thing with my insurance deductibles. I have higher deductibles on all my policies to keep the premiums down and I keep the money to cover those deductibles in an account that is separate from my EF.

I rarely buy extended warranties – that’s something typically reserved for major appliances and I will probably get one when I finally break down and purchase my first LCD television. I think self-insuring can be a good practice depending on the type of purchase. There are certain things (like Front-Load Washers and Televisions for example) that I won’t even try it with b/c they are extremely expensive to fix. Repair costs can easily exceed their value even when they are relatively new.

Maybe this post can lead you into another – one about how cheap things are made now. It seems like everything is just meant to be disposable now and if you get five years out of it then you’re doing well. My dishwasher is less than two years old and just started making the same sound a cat makes when you step on it’s tail… That’s probably not good. And this is coming on the heels of me replacing the hard drive in my 13 month old computer. It’s getting old.