Convincing the customer to purchase extended warranty

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Reference no: EM139995

Problem: Whenever someone buys an automobile, an appliance, or almost anything else, the salesman will try to convince the customer to purchase an extended warranty (a warranty that extends beyond the one that comes with the item). Many companies make more money on the extended warranties than they do on the item itself.

a) Explain why one should never, ever, buy an extended warranty.

b) Except, perhaps, there might be a rare situation when buying an extended warranty is rational. When? [Note: The answer must use only information that is always available to the customer, so "If the product is likely to break" is not an acceptable answer]

c) So why do many people buy these things anyway?

Reference no: EM139995

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