Why You Don’t Need An Extended Warranty

November 19, 2012 by  

Consumerreports.org has a very informative article on the misconception and disadvantages of an extended warranty.  The article is from a few years ago but the information is just as relevant today as ever. –

This holiday season, shoppers are expected to spend over a billion dollars on extended warranties for laptops, flat-screen TVs, other electronics, and appliances.

And almost all of it will be money down the drain.

Retailers are pushing hard to get you to buy extended warranties, or service plans, because they’re cash cows. Stores keep 50 percent or more of what they charge for warranties. That’s much more than they can make selling actual products.

Shoppers have begun to take note of the practice, and they don’t like it: In a recent survey, the Consumer Reports National Research Center found that over 60 percent of consumers cited aggressive pushing of extended warranties as their top shopping annoyance. We included that fact in our annual "Dear Shopper" warning about bad deals for consumers – the second time we’ve singled out extended warranties in our holiday-season advice.

For the consumer, extended warranties are notoriously bad deals because:

  • Some repairs are covered by the standard manufacturer warranty that comes with the product.
  •  
  • Products seldom break within the extended-warranty window—after the standard warranty has expired but within the typical two to three years of purchase—our data show.
  • When electronics and appliances do break, the repairs, on average, cost about the same as an extended warranty.

In general, we have found extended warranties to be a bad deal for the customer and have long advised against them. The most cautious consumers might want to consider an extended warranty for a repair-prone brand, provided that the warranty is both inexpensive and comprehensive and the cost of repairs tends to be high.

Stingy manufacturer warranties

The hard sell for extended warranties is coming at the same time that some manufacturers’ warranties are getting skimpier, especially for labor, on pricey goods like laptop computers.

Terms have shrunk from 1 year to 90 days in some instances, making repairs potentially expensive even if the parts are free.

Apple, for example, has long provided a stingy 90 days of phone support on its products, including computers, iPods and iPhones. That makes the company’s AppleCare extended warranty (which provides three years of support) worth at least considering – even if the main reason for doing so is to address the limitations of the included warranty.

Some plans offer in-home service or instant replacements for products as inexpensive as printers, freeing people from having to drop off or ship their broken products to service centers. With TVs, manufacturers typically provide in-home service for larger screen sizes, so check the fine print for a particular company to see whether your set would be covered.

It’s important that you investigate the manufacturer’s warranty coverage before you buy any product, and patronize those manufacturers that offer decent warranties. More important, buy from manufacturers whose products are reliable in the first place. Brand reliability information for major products we test is available to ConsumerReports.org subscribers.

Overall, most products have been reliable enough that we don’t think you need an extended warranty.
If you feel you must buy an extended warranty
For consumers who want peace of mind and don’t mind paying for an extended warranty they’ll probably never need, or for those whose chosen brand is repair prone, we offer this advice:

First check your credit card

Before you say yes to an extended warranty on any product, see whether your credit card provides similar coverage. Such plans, most often found on gold and platinum cards, typically lengthen the original manufacturer’s warranty by as much as one year.

See what other retailers offer

Some retailers might extend a warranty without charge. Costco, for example, extends the manufacturer’s warranties on televisions and computers to 2 years from the date of purchase, at no cost to you.

Beware of hidden "gotchas"

For heavy items such as large TVs or major appliances, ask whether the extended warranty includes in-home repair or pickup. For TVs, who reinstalls it and reconnects it to your audio-video setup? And if the product will be repaired, is there a lemon clause such that after a few repairs the product is replaced?

Keep in mind that an extended warranty usually begins the day you purchase a product, so it overlaps with the standard warranty for a year (assuming that’s the term of the standard coverage). So a three-year policy gives you only two years of additional coverage.

Don’t pay more than 20 percent of the purchase price of the product for one. Always try to negotiate a better price.

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