When you buy any type of product, you want to be sure that it’s going to function as advertised and that it’s going to last a reasonable amount of time. To protect these interests, manufacturers often offer warranty services that are designed to repair or replace a product in the event that something doesn’t work as advertised. In fact, the issue of warranties is such a big deal that there are actually laws, including the Uniform Commercial Code and the Magnuson-Moss Warranty Act, that deal with the topic.
Although manufacturers provide an implied warranty, and many of them a written warranty, companies exist that sell extended warranty products. These may be advertised as continuing the original warranty period, or they may be sold as additional products that add coverage on top of the warranty coverage offered by the manufacturer. But, do you need these additional warranty coverage products?
Understand the Limitations
Before purchasing a warranty product from a third party, it’s a good idea to consider the limitations of the additional coverage. Some warranty providers won’t include custom products. If you purchased custom designed replacement electric motors, your products may not be eligible for the additional coverage whereas stock electric motors might be covered.
Regular Use Clauses
Another thing to be mindful of is whether or not an extended warranty policy covers all use cases of a product. In keeping with the replacement motor example above, if you purchase gate elevator replacement motors or freight elevator replacement motors and then use these products in a setup not involving a gate or elevator, the extended warranty may restrict your coverage. You need to read the fine print to find out if those elevator replacement motors you just bought will still be covered if they are used in a different configuration instead of used in an elevator design.
Who Provides the Coverage?
It’s also worth noting that, in most cases, the manufacturer has no direct involvement in third-party warranty agreements. These are typically offered outside of the manufacturer’s purview and coverage provided by these warranties will not be honored by the original manufacturer. Instead, repairs and replacements will be handled directly by the company selling the extended warranty. As such, any claims will be directed by the extended warranty provider and its contracts.
Does the Cost Make Sense Now and in the Future?
You’re also encouraged to weigh the financial cost of an extended warranty against your present and future concerns. An extended warranty on an expensive product may make sense now, but will it still make sense years from now as the product has depreciated in value and cost? Do you truly expect to use the product beyond the original warranty period, thus justifying the purchase of extended coverage?
One of the selling points of an extended warranty policy is the idea that you save money over the cost of repair or total replacement of a defective product. If, however, the product can be purchased new at a lower cost in the future compared to the total cost of the warranty coverage over the course of years, the extended warranty may end up costing you more in the end. This becomes an even bigger factor when you consider contract length.
The Claims-Paying Ability of the Issuer
Finally, take a look into the track record of the issuing provider. If a company sells an extended warranty, it obviously will need to have the ability to make good on claims. If you aren’t able to find any information about the provider or you come across a lot of negative reviews from customers, you may need to rethink your policy purchase.
This is not to suggest that extended warranty providers are unscrupulous in and of themselves, but just like with any other type of service agreement, it’s up to you to perform due diligence to protect your interests.