Extended Warranties vs. Manufacturer Warranties: What’s the Difference?

By Tom Scott Mar 14, 2019 10:00:00 AM


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In the consumer products space, both manufacturer and extended warranties offer valuable benefits. But how are they different?

Generally defined, a warranty is a contract between a consumer and a company in which the company agrees to repair or replace a product that breaks within a fixed period of time. For the most part, warranties are intended to accomplish similar goals – but depending on the industry and coverage, different types of warranties can offer different advantages.  

Within consumer products, there are two warranty types that dominate the space: extended warranties and manufacturer warranties. What makes these two plans different, and how do they benefit consumers and retailers? Let’s take a look.

Manufacturer warranties

Often known as ‘limited warranties,’ manufacturer warranties are automatically attached to the purchase of a product by the product’s manufacturer. What makes them ‘limited?’ They’re only good for a specific time after the purchase date. This time frame generally ranges anywhere from 90 days to a year, and coverage is usually structured as a product replacement plan. Terms and conditions—which detail manufacturer responsibilities, customer rights, and define when a product requires replacement or repair—are decided by the manufacturer.

Extended warranties

Designed in nearly the same way as manufacturer warranties, extended warranties lengthen the protection period and typically offer different coverage terms. Technically known as ‘service contracts,’ extended warranties are available from the retailer at the point-of-purchase. This type of warranty is not automatically packaged with the product and requires an additional fee. Additionally, while extended warranties do extend a product’s coverage period, they do not extend the terms and conditions put in place by the manufacturer. Instead, additional or updated terms are put in place to ensure the benefits of extended protection.

Retailer value

So, what’s the value for retailers? First, warranties offer an additional line of revenue. Whether it’s manufacturer coverage or extended protection, if a retailer has a repair center, the warranty firm can authorize them as a service provider helping create retailer revenue.

Not only do warranties help retailers maintain a healthy bottom line thanks to additional revenue opportunities, they also encourage consumer spending. Many retailers find that consumers are more willing to make expensive purchases if they know their investment will be protected long term. And finally, with added protection and peace of mind in place, warranty options help increase customer loyalty, reducing complaints and leading to repeat business.

Consumer value

In addition to the promise of protection, warranties offer obvious consumer benefits in the event the promise becomes a reality. Customers no longer need to worry about the prospect of expensive repairs since out-of-pocket costs are offset by coverage. Additionally, an extended warranty can connect them with local providers who can service products without shipments or lengthy travel. It’s the kind of peace of mind consumers crave, and the type of protection that’s especially useful when applied to today’s expensive, new technologies.

From additional retail revenue lines to complete peace of mind for consumers, warranties are worth every penny. For more information on the benefits that warranties provide retailers, check out our blog about how offering warranties is more than just checking a box.

Categories: Warranty Solutions

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