When are Warranties Worth Buying in Your Company?

Do you ever wonder which warranties are worth buying when you acquire new equipment for your business? Have you ever paid for an extended warranty on top of the manufacturer’s warranty and wondered if it was worth the cost?

Warranties might be worth it if you cash in

The thing about warranties is you have to file a claim to get your repairs covered. A warranty is only as good as your willingness to use it when needed. In other words, if you actually submit claims for your warranties, it might be worth the cost.

The toughest part is tracking what equipment and parts are under warranty, but it’s worth the effort because it means saving money. For instance, many companies save money they never knew they could save just by tracking their warranty reimbursement opportunities.

A large number of warrantable repairs are never cashed in, and that means most people aren’t paying attention to their warranties. The same is true for extended warranties – most people don’t file claims because they don’t realize they can.

A warranty is generally worth buying if the cost of the warranty doesn’t exceed the value of your repairs, or it’s more convenient and worth the extra cost. However, if you aren’t filing claims under your warranties when you absolutely could, you’re losing money and the warranties you bought aren’t doing you any good.

Why warranties exist

Warranties are how manufacturers guarantee their products to their customers and it also helps them sell their products. When it comes to expensive pieces of equipment and machinery, customers won’t usually make a purchase without a warranty.

It’s critical for expensive pieces of equipment to come with a warranty because the customer would be left high and dry if anything happened. A warranty reassures the customer that they won’t lose their money on the purchase if it’s defective. For example, when something breaks under a warranty, the company is legally obligated to repair or replace the product according to the warranty.

A standard warranty usually covers product defects and other issues arising from normal use of the product, but won’t cover misuse or abuse. However, manufacturer warranties don’t last forever. That’s why extended warranties exist – to provide additional coverage for a longer period of time.

What are extended warranties?

Extended warranties, often called purchase protection plans, are generally low-priced warranties that extend your coverage past the manufacturer’s warranty. For example, if the manufacturer’s warranty lasts for one year, the extended warranty might extend that by six months.

Many extended warranties only cost between $20 and $40, which doesn’t seem like much money. At first glance, it’s hard to imagine such a small purchase not being worth the cost. However, if you’re not going to use the warranty, or if your repairs are less than the cost of the warranty, you’re losing money.

Are extended warranties ever worth buying?

The popular opinion is that extended warranties are a scam. The problem is that most extended warranties cover repairs that won’t be necessary in the timeframe covered by the warranty.

Many experts say that today’s appliances are reliable enough that an extended warranty is rarely needed. The chance of an appliance – like a dishwasher – needing a repair during the warranty period is low.

The other problem is that fixing an appliance is unlikely to cost more than the warranty itself.

When is an extended warranty worth buying?

While it’s almost guaranteed that most pieces of equipment will come with an offer for an extended warranty, you may not need any protection beyond what you get from the manufacturer. That doesn’t mean you should never buy additional warranties, however.

There are a couple of situations in which an extended warranty is worth the cost, even when that cost exceeds the cost of repairs. For example, say you’d have to haul a large piece of equipment into a repair shop to get it fixed. If the warranty costs more than the repair, it would be far more convenient to pay extra and have a service tech come to you under the warranty.

Another situation that makes the cost worthwhile is if you don’t have the time to schedule a repair or you just don’t want to bother. In this case, like the other scenario, convenience is worth the extra cost.

Warranties are only worth buying if you’ll use them

At the end of the day, a warranty is only worth the cost if you’re going to cash in on your warrantable opportunities. Next time you’re asked to buy an extended warranty, carefully consider the cost and the likelihood that your product might need a repair.