You’ve bought a new car or home ap­pli­ance and, just when you thought the sale was con­cluded, the sales­per­son says: ‘Can I of­fer you an ex­tended war­ranty on that?’ Wait … what? Think be­fore you sign. You may not need an ex­tended war­ranty. Neesa Mood­ley rep

CityPress - - Tenders -

Do you need them? The answer varies, de­pend­ing on what you have bought and the age of the item you have bought. For ex­am­ple, if you are buy­ing a new car, it al­ready comes with a free ser­vice plan for the first three to five years. A new car also typ­i­cally comes with a man­u­fac­turer’s war­ranty. For ex­am­ple, both Subaru and Hyundai now of­fer five-year warranties on new cars. This should cover any man­u­fac­tur­ing de­fects, mechanical or elec­tri­cal, for a cer­tain pe­riod af­ter the pur­chase date of your ve­hi­cle.

Warranties may dif­fer from one man­u­fac­turer to an­other, but on av­er­age the war­ranty for a car is usu­ally for three to five years, or for a spe­cific kilo­me­tre dis­tance. Warranties usu­ally cover re­pair costs to parts such as the gear­box, wa­ter-cool­ing sys­tem or head gas­ket, and other large parts in the en­gine.

You can buy an “ex­tended war­ranty” when you buy a new car. This means that you are in ef­fect buy­ing ex­tended cover for a longer pe­riod, so af­ter five years, when the orig­i­nal war­ranty ex­pires, you will con­tinue to en­joy the ben­e­fits of a war­ranty for a fur­ther two to three years. But con­sider the fol­low­ing:

You might not keep the car for a full eight years. Most con­sumers, South Africans in par­tic­u­lar, change their cars every three to five years, so you are un­likely to need the ex­tended war­ranty.

When you trade in the car or sell it pri­vately, you are un­likely to re­cover the cost you laid out for the ex­tended war­ranty.

If you did choose to keep the car for longer than five years, there is noth­ing to stop you from buy­ing an ex­tended war­ranty five years af­ter you ini­tially bought the car.

An ex­tended war­ranty can cost any­thing from R3 500 for a ba­sic war­ranty to R8 500. If you buy this prod­uct when you are buy­ing a new car, it’s likely that you are buy­ing the car us­ing a hire pur­chase agree­ment with a bank, and the cost will be added to the to­tal loan value. So, in ef­fect, you are now go­ing to be charged in­ter­est over the next five years for a prod­uct you will only need in five years’ time.

An ex­tended war­ranty might make more sense if you are buy­ing a three- or five-year-old car, which is no longer cov­ered by the man­u­fac­turer’s war­ranty. Ide­ally, if you do buy an ex­tended war­ranty, you should have fac­tored this into the cost when you were sav­ing for the de­posit on your car.

This means you can pay the cost of the war­ranty up­front in cash and you can avoid pay­ing in­ter­est, which you would be li­able for if you added the cost of the war­ranty to your hire pur­chase agree­ment.

You could also just save the “pre­mium” you would have paid each month for an ex­tended war­ranty and use your sav­ings for the main­te­nance costs of your car.

Bear in mind that by the time you face ad­di­tional re­pair costs and your orig­i­nal man­u­fac­turer’s war­ranty has ex­pired, you are likely to have fin­ished pay­ing for your car or you’ll at least be quite close to the end of your loan agree­ment.

Ex­tended warranties on ap­pli­ances

When it comes to ap­pli­ances, it helps to do your home­work. Find out what the man­u­fac­turer’s rep­u­ta­tion is for af­ter-sales ser­vice. You can do this by check­ing cus­tomer ser­vice sites such as hel­lopeter.com.

Busi­nesses are rated out of 10 and are judged on cri­te­ria such as the num­ber of re­views re­ceived, the sen­ti­ment ex­pressed by con­sumers, the com­pany’s re­sponse time and the num­ber of con­ver­sions (where an un­happy cus­tomer be­comes a sat­is­fied cus­tomer).

You should also bear in mind that most things cov­ered by an “ex­tended war­ranty”, such as ac­ci­den­tal break­age, would al­ready be cov­ered by your house­hold con­tents in­surance pol­icy.

In ad­di­tion, by the time you re­quire “ex­tended war­ranty cover”, you might ac­tu­ally be bet­ter off sim­ply re­plac­ing the ap­pli­ance – the re­place­ment cost might be cheaper than the cost of the ex­tended war­ranty.

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