Are Product Warranties Ever Worth It?

Protect your purchase by buying an extended warranty!” We hear this all the time when buying appliances, electronics and other products. But are those warranties worth the cost? Probably not. Here’s why…

Most products come with a manufacturer’s warranty. The point-of-sale push is for you to buy a service agreement to repair the item if something breaks over a period beyond that of the manufacturer’s warranty (typically doubling the manufacturer’s warranty period). Problems: Stores typically keep 50% to 70% of the price of the warranties they sell…and the businesses that back the plans and process the infrequent claims keep a hefty cut, too. So warranties are great deals for the sellers but usually bad deals for you.

Extended warranties are similar to insurance, and insurance typically is for protecting against catastrophic financial loss (homes, vehicles, health). For most of us, a $200 repair bill is not a catastrophic loss. Most items don’t rise to a level that justifies the additional cost of the warranty.

There are alternatives. Check your credit card’s terms—many double manufacturers’ warranties. Also: Costco and some other retailers enroll some purchases in extended warranties to encourage you to buy from them.

You are pressured to buy it. Warranties often are offered when you’re at the register with a line of impatient shoppers behind you. The retailer is counting on you to make a hasty ill-informed decision.

There are plenty of reasons to decline…

Too many exclusions. Extended warranties cover only certain types of breakdowns, and it’s nearly impossible to figure out what’s included and what’s not.

If they are going to fail prematurely, most products do so within 30 days, well within the manufacturer’s warranty period.

Extended warranties often cost almost as much as repairs would. Say you spend $800 on a clothes dryer and $100 on a protection plan. If the dryer breaks and the problem is covered by your protection plan (it might not be!), then you’ll get a “free” repair. But clothes dryer repairs cost less than $200, on average, which means you’ll have spent $100 to cover a possible $200 bill. Even worse: It is likely that nothing will break, and the company will simply pocket your $100.

You can’t choose who will do the repair…or where it will be done. The best repair companies don’t do work for extended warranty companies…and even if you get a good one, you might have to send the product—perhaps a computer or TV—to the repair company.

If you still want a warranty: Don’t buy it in the heat of the moment. Take some pressure-free time to consider your needs, and start using the product to test its quality. You often can call the seller later to purchase a protection plan, and it needn’t even be from the retailer where you bought the product. Visit
SquareTrade.com or similar sellers for better deals on warranty plans.