To buy or not to buy an extended warranty is completely the call of the end user. However, it is an excellent mode for hedging the breakdown risk of your product.
By Vivek Burman
People are becoming increasingly dependent on technology and gadgets to make their personal as well as professional lives easier. With gadgets becoming the backbone of our daily life, the question that is often asked is, “Is it worth buying an extended warranty or a service contract for a device or an appliance?”
As technology has evolved over time, so have the service contracts, and after-sales service has become essential for the modern consumer. Having invested a sizeable amount of money in purchasing the product, consumers want to get automated, hassle-free, and efficient services that help extend the lifespan of their gadgets. Furthermore, repairs and replacement of spare parts can be an expensive and time-consuming process. This is where the value of an extended warranty or a service contract comes in: managing costly repairs and associated expenses in the long run.
Extended warranties or service contracts are offered by financial services providers, membership groups, manufacturers, distributors, and retailers of consumer goods, including automobiles, homes, consumer appliances, electronics, and furniture. These products can be an extension of the manufacturer warranty, or offer value-add elements for providing convenience to the customers.
While buying a product, say an automobile, we never think twice before buying motor insurance because a part of it is mandatory (Third Party Cover). Sometimes, we assume that since motor insurance is in place, there is no need for purchasing an extended warranty. However, motor insurance and extended warranty offer different types of customer protection and cover, although they might have some minor overlap. Typically, an extended warranty covers any electrical or mechanical breakdown of the product. It generally includes the cost of parts to be replaced, labour charges for the same, and any associated charges. Motor insurance, on the other hand, covers accidental damage, and loss or theft of the vehicle. In essence, both insurance and extended warranty are distinct products and provide protection to the consumer in different ways, but they make for a winning combination together.
As per one of the prominent studies in the automobile sector i.e. J.D. Power 2017 India Vehicle Dependability Study, more vehicle owners are opting for extended warranty for their vehicles. In 2017, 38% of all new vehicle owners surveyed said that they had an extended warranty, which was up from 27% in 2016. More first-time vehicle buyers (44%) purchased an extended warranty than repeat owners (31%). The study further stated that longer-term vehicle dependability built advocacy and loyalty.
The factors that the consumer should take into account when making a purchase should be about the price of the product, its importance, handling and usage, as well as repair/damage history of the product. Whether or not you want to cover the product breakdown during usage, and protect residual value, will help you decide if you should buy an extended warranty. Thereafter, you need to evaluate and choose an extended warranty provider, and the plans offered.
Before zeroing in on the extended warranty provider, it is very important to understand the provider’s history, credentials, track record, and the product offered, so you can review all the terms and conditions of the offering. It is also important to understand which parts of your device or appliance are likely to fail, and if they would be covered or not. Once you have decided that you are buying an extended warranty or a service contract, make sure that coverage is Pan-India and not restricted to certain locations alone.
To buy or not to buy an extended warranty or a service contract is completely the call of the end user. However, it is to be noted that an extended warranty is an excellent mode for hedging the breakdown risk of your product. No matter how reliable modern products and gadgets are, replacement or refurbishing of damaged parts is an expensive option. An extended warranty safeguards your products against expensive and unforeseen repairs.
(The author is South Asia Director for The Warranty Group (TWG), a global leader in warranty solutions and after-sales services for 50+ years)