Insider Debunks The 9 Extended Warranty Sales Pitches

Here are 9 of the most common lines salespeople try to feed you in order to get you to buy an extended warranty, debunked by an insider. His job is training and development in this 3rd-party service plan industry, a job he’s leaving soon because he’s sick of the “half-truths and deceptions” it foists on consumers… which he will now reveal to you.

1. “This will give you peace of mind.”

Why do you need peace of mind on a new product? What is the significance of the years 2, 3, 4 or 5? Peace of mind in years 2-4 on a washer, dryer, range? Peace of mind in year 2 on a vacuum? Peace of mind in year 4 on a Dewalt tool (3-yr warranty)? If I asked 100 people in a room how long their refrigerator, range, etc. lasted, how many would say 10 years, 15 years, 20 years? The first few years have no bearing for you other than a minimal amount of risk the third-party administrator wishes to take. There is no mind-blowing consumer research at hand. “5 year warranties” on appliances were offered 20 years ago and have not changed.

If you read any of the major consumer publications on repair history and incidence of repairs, you will find, for instance for major brands of LCD and Plasma TVS, that only 2-5% of consumers have had at least one repair in the initial 4 years of ownership. This includes year one under mfr warranty.

2. “It’s only pennies a day.”

The retailer is insulting your intelligence by trying to make a lump sum payment sound affordable on something that is entirely useless and unnecessary.

3. “We have a “No Lemon” feature.”

You are told that if a product requires 3 repairs, it will be replaced by a full value gift card or check. Unfortunately, manufacturer service does not count. So, if you are put through the ringer under mfr warranty, you still start from repair ONE after the manufacturer’s warranty ends. Plus, the 3 repairs must be for the same defect. So, theoretically you might have 6,7,8+ repairs and not get your product replaced.

4. “If the product breaks…..”

The retail sales person has no repair data, no product history and no concept of risk. He is NOT a consumer advocate. They are offering you an extended plan because they either make a commission on it or they are under intense pressure from their managers to sell it. Period. In fact, if you were able to have a frank conversation with many of them, they would tell you they loathe having to sell them.

5. “Repair costs are high.”

Even if you were one of the few that had a repair in the first few years, the cost of the plan would probably be a wash. In fact, the third party plan administrators make agreements with service companies. Many times, this restricts who you can get service from. Companies that may be closer and charge a higher fee are not used in favor of others who accept a lower fee for more work. You’re better off having the repair companies compete for your business, when you need service.

6. “They don’t make them like they used to.”

Salesfolk said this line 20 years ago. Remember, they are salespeople, not engineers, not manufacturer reps with access to product life expectancies. The only time they generally see defective products are in the return policy period. This is a mindless statement only used as a scare tactic for the gullible.

7. “We cover normal wear and tear while the manufacturer doesn’t.”

Other than physical (including liquid) damage and cosmetics, if electronics fail in year 1, the manufacturers cover it. The product is going to wear out in year 1? The extended service plan doesn’t cover mfr warranty issues anyhow. Ask the salesperson what parts would likely wear out in years 2 and 3. The answer will invariably be made up. Also, for outdoor power equipment products, “normal wear and tear” becomes even more spurious. Belts and other maintenance items are not covered under “normal wear and tear.” Plus, the mfr warranties on the equipment are 2-4 years and the mfrs don’t cover items such as belts either.

8. “We cover power surges from day 1.”

This is a seemingly big sticking point with the person trying to sell you the plan.

First, even if the mfr did diagnose failure due to power surge, your service plan administrator would have to then have you send it to one of their service providers to rediagnose the problem.

While there are storms, power outages and voltage fluctuations, do you see people running to the retailers in mass to replace their appliances and televisions after a big storm or after a heat wave? (Think about this – air conditioners have to perform at their heaviest workloads during storms.) The answer is overwhelmingly NO.

The people selling you an extended service plan know this as well. Product electronics are made to withstand power fluctuations and although microprocessors can be sensitive, good transformers within products and surge protectors with ample joules will give you safeguards. Plus, if you read the extended service plan brochures, you will be made to believe, amazingly, that power surges can occur with gas-powered products and cordless tools; it is listed as a “benefit,” etc.

Plus, if you really did suffer major electrical damage to your home, you would file a homeowner’s claim first, and many of the plans are “secondary” to other insurance – yes, they require you to file whatever other insurance you have first. Power Surge Protection claims are statistically non-existent with the plan administrators, thereby rendering this the equivalent of asteroid insurance.

9. “The plan begins from Date of Purchase.”

Many retailers engage in this deceptive business practice where the manufacturer warranty is masked or overlapped without the consumer deriving any real benefit during the manufacturer warranty period. For instance, a “3 year service plan” is actually plus 2 years after the manufacturer warranty. The actual terms and conditions will state the “the manufacturer is responsible for repairs under the manufacturer warranty period.” The service plan administrator knowingly does this as it would be business suicide to take responsibility for the mfr warranty period. MOST (not all) of the major retailers engage in this practice.

As we’ve said many times before, extended warranties are usually a bad deal. You usually get better protection from the manufacturer’s warranty or the warranties provided when you buy with a credit card. And now you know how to disarm a salesperson trying to sell you a useless warranty.