Should You Buy an Extended Warranty?


Determining if You Should Purchase the Warranty

The Service Contract Industry Council estimates that in 2010, consumers purchased 250 million extended warranties on various consumer products offered by companies on everything from cars and washing machines to computers and televisions.

In most cases, an extended warranty simply lengthens the term of the original manufacturer’s warranty for a year or more, and sometimes provides coverage for certain in-home repairs or accidental damages to an item. In this case, the extended warranty should permit you to get the product fixed or replaced at no charge if something with the product goes wrong during the warranty period and it was not your fault.

These extended warranties, however, can be pricey, and many consumers often wonder whether the high price tag of an extended warranty is really worth it. 

Extended Warranties on Household Items

According to Consumer Reports, most extended warranties are simply a way for retailers to make a profit, and are of little or no benefit to the consumer.

  • Few products break or fall apart after the basic warranty period expires and the cost of an extended warranty will often be greater than the expense of simply repairing the product on your own.
  • If a major malfunction with a product is going to occur, it typically will occur during the first year that you own the product, which falls within the manufacturer’s warranty period. This is particularly the case for products such as televisions, digital cameras, household appliances, and cell phones. On the other hand, computers, laptops, and tablets are more likely to break down following their basic manufacturer’s warranty period, which can make an extended warranty that provides accidental damage and tech support coverage more cost-effective.

Extended Warranties on Vehicles

Many consumers believe that they should purchase an extended warranty for their vehicles, as they see vehicle repairs as a large future expense that they want to minimize if at all possible, and an expense that will often arise soon after the manufacturer’s warranty expires.

  • The manufacturer’s warranty typically lasts for three years or 36,000 miles, except for items that wear out, such as brakes and clutches.
  • Furthermore, many vehicles today are made of quality materials and technologies that often require little maintenance, as demonstrated by the ratings placed on various makes and models of vehicles by Consumer Reports and other organizations. Customers may buy out of fear that their vehicle will require expensive repairs after the warranty expires. For more information check out this resource.
  • Frequently the cost of an extended warranty for a vehicle simply outweighs the repair expenses that will be necessary during the extended warranty period.

Other Drawbacks of Extended Warranties

Another downside to extended warranties is that they tend to exclude many types of repairs and parts and contain a great deal of fine print that may render the warranty useless to you. Additionally, some warranties provide for deductible payments that must be met before coverage begins, and some warranties place limits on your choice of repair shops. Some warranties may exclude labor costs and only cover parts.

Be sure to read all of the terms of the extended warranty that is offered before you purchase it, so that you have clear sense of what the warranty will and will not cover.

Alternatives to Extended Warranties

There are alternatives to extended warranties that may allow you to minimize the impact of repair costs over time on your budget. For instance:

  • You can create a dedicated repair fund by making weekly or monthly deposits into an account designated solely for necessary repairs. Setting these funds aside periodically may help you avoid any unanticipated repair bills that you are unable to pay.
  • You can also check with your credit card company for alternatives. Many credit card companies offer warranties on items purchased using the card for a certain period of time beyond the original manufacturer’s warranty. In many cases, the coverage provided by the credit card company program will be much greater than that provided by an extended warranty, and it will be provided at no cost to you.

Review all warranty policies carefully before purchase, only then can you decide if the extended warranty is cost effective, and worth the additional money.

Additional Resources


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