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repair and/or maintenance for a specific time. Warranties, however, are included in the price of the product; service contracts costs extra and are sold separately. To determine whether you need a service contract, consider:
• Whether the warranty already covers the repairs and the time period of coverage that you would get under the service contract.
• Whether the product is likely to need repairs and the potential costs of such repairs.
• The duration of the service contract.
• The reputation of the company offering the service contract.
4 . Implied Warranties
Implied warranties are created by state law, and all states have them. Almost every purchase you make is covered by an implied warranty.
The most common type of implied warranty—a “warranty of mer- chantability,” means that the seller promises that the product will do what it is supposed to do. For example, a car will run and a toaster will toast.
Another type of implied warranty is the “warranty of fitness for a particular purpose.” This applies when you buy a product on the seller's advice that it is suitable for a particular use. For example, a person who suggests that you buy a cer- tain sleeping bag for zero-degree weather warrants that the sleeping bag will be suitable for zero degrees.
If your purchase does not come with a written warranty, it is still cov- ered by implied warranties unless the product is marked "as is," or the seller otherwise indicates in writing that no warranty is given. Several states, including Kansas, Maine, Maryland, Massachusetts, Mississippi,
Understanding Warranties 55
The worst thing about an extended warranty is that it is overpriced. In fact, about half of what you pay goes to the salesperson's commission.
—Dave Ramsey