Question: Should I buy an extended warranty for my large gifts this holiday season?

Answer: We have all been there. Exhausted. Checking out of a long line. Enamored by the lack of intelligence in today’s checkout personnel. Then they hit you with “the question” – would you like to buy an extended warranty?

Normally, we don’t have any information about the original manufacturer’s warranty, let alone, an extended warranty.  The checkout boy or girl may sputter a few words about coverage offered, but we don’t know the details.  We certainly don’t know the important fine print.  However, we want to be protected if plasma leaks from our new TV screen, or if the kids flush the new cell phone down the toilet.  So what do we do?

Statistics shed an unfavorable light on extended warranties.  Most damages occur during the original manufacturers warranty period – usually 1 year.  Otherwise, products tend to outlast the extended period – usually 3 years.  With overlapping warranty coverage during the first year, you are essentially wasting money.

Financial statistics also show extended warranties yield a high profit for stores.  60%-80% of fees go toward stores profits, while only 20%-40% are actually used toward repairs.  Certain large big box retailers report up to 90% of operating revenue is derived from the sale of extended warranties.

Your best bet is to purchase the large gifts on a credit card that provides extended warranty coverage.  American Express offers additional 1 year coverage identical to the original manufacturer’s warranty with all of its cards.  Visa and Master Card have a few limitations.  Call your credit card company for details.  Remember to pay the items off after purchase.

Attorney James Haroutunian practices real estate law, estate planning and business representation in Billerica at 790 Boston Road.  Contact him with questions at 978-671-0711 or email him at james@hlawoffice.com. You can also find his blog at both www.prioritylaw.com and www.hlawoffice.com.

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