War on Warranties: Are Extended Warranties Worth It?

November 24, 2009 By Nick Mokey

Don’t let retailers prey on your fears. We break down the reasons that extended warranty plans on electronics just don’t add up.

After committing to dispense hundreds of dollars for a television, laptop or other high-dollar electronic device, the last thing most of us want to hear is a retail cashier hitting us up for another few hundred to buy an extended warranty.

“No. No thanks. I’m good.”

Most of us dispatch it in a heartbeat. But have you ever wondered whether you’re setting yourself up for a disaster? Good news: You’re not. Here’s why you should pass on extended warranties every time.

Modern electronics are incredibly reliable.

Ever noticed the lack of electronics repair shops around lately? Probably because they rarely break like they used to. According to Consumer Reports, only three percent of LCD and plasma HDTVs purchased will require a repair within three years – the period a typical extended warranty might cover. That’s a one in 33 chance you’ll actually take advantage of that several-hundred-dollar protection plan you just paid for. With odds like that, you might be better off taking the cost of a warranty to a craps table.

Shopping expert Robin Fiedler concurs. “I would say statistically, the way it goes with technology, an extended warranty is not worth the money,” she says.

Extended warranties usually cost as much as the repair would.

Even if you buy a warranty and end up getting a repair covered by it, it doesn’t necessarily justify the cost. According to the same Consumer Reports data, the average out-of-pocket expense for a repair is $300. Considering Apple wants $349 for three years of protection and Best Buy wants $250, you’ve probably come pretty close to breaking even.

“Usually, the amount that the repair would have cost you in the first place is same as the extended warranty anyway,” says Fiedler.

You’ll want a new one by the time it breaks, anyway.

Things move quickly in the technology world. While a three-year-old washer might look pretty comparable to a new one, a three-year-old laptop is a joke by modern standards. By the time many tech devices break, you’re typically ready for a shiny new one with all the bells and whistles anyway.

Even if you’re not ready to upgrade in features, a comparable device usually costs a fraction of what you paid years ago.

“If it does break after three or four years, with prices constantly dropping, there’s a good chance you’re going to be able to get a brand new one for a little bit more than you would have paid to repair it,” says shopping expert Alison Storm. Who said depreciation is such bad thing?

The X Factor

Any number of unforeseeable factors might cause a hassle actually collecting on an extended warranty.

If you’re anything like us, the odds of you actually finding the warranty paperwork when something breaks might be slim. Maybe it was destroyed in a fire. Maybe you just lost it. Maybe your ex ran off with it.

Even if you find the paperwork, there are still issues. Maybe the part that broke isn’t covered. Maybe you spilled a glass of water on your laptop to no effect the first week you bought it, but the company won’t cover your “accidental damage” three years later when the fan quits for no related reason. Maybe the store that sold it to you folded (Circuit City, anyone?).

Showing 10 comments

Ian Bell at 9:27am 3rd December 2009 That's not 100% true. There are still a lot of electronics that are repairable, particularly cell phones, computers and laptops and even LCD TV's. The problem is that electronics have come down so far in price that it's easier to buy a new one than to pay someone $45/hour to try and fix what you currently have.
KJ at 7:26am 3rd December 2009 > Ever noticed the lack of electronics repair shops around lately?
> Probably because they rarely break like they used to.

No. There aren't repair shops because electronics aren't particularly repairable any more. Automated manufacturing, highly integrated packaging, almost microscopic components mean that "repairing" modern electronics usually means "replacing", or at best, swapping out a significant percentage of the unit. That's not a model that lends itself to old style repair shops.
Scaryllama at 8:08am 2nd December 2009 I would agree in general. HOWEVER, use common sense!!! If something costs over $1500 it is probably a good idea to get insurance that it is going to work. I know that Applecare is easy to use (they can look it up basedon the machines' serial number) and well worth the peace of mind.
rick1557 at 10:46am 27th November 2009 I thought that too, but some things you by come with 5, 10, lifetime warranties, like appliances or mattresses, easy to loose track.

Also, what I like is, when I'm done with a product, I sell it on Craigslist. The warrantylife.com system keeps the product data, so I can just click and sell it with a full description, pictures. This gets more $ for my item and a faster sale.

Also older manuals get deleted online, so when I need them, they are there.

Thanks for the chat!

Richard
dang at 10:38am 27th November 2009 Sure, makes sense to me that people will find it useful.

For me, I'd forget about it. I don't buy things often enough to use a site to keep track of receipts/warranties.
rick1557 at 10:33am 27th November 2009 I've tried keeping things in a folder, but between my wife, me and managing the kids, it becomes very messy. I like this site because when I go to a store or online, it will transmit the data into the system with ease. When i have to dig out the receipt I need, it takes me 15-30 minutes, between screaming kids and other things, this is a lot of time.

With the system, I can manage everything in one place, check warranty expiration dates, get reminders, find manuals (I don't have to keep them) even after the product has been deleted from the retailer database. When I want to resell it, the data is all there to use.

Richard
dang at 10:04am 27th November 2009 then you have to remember the site that you are keeping track of your warranties with... Why not just keep them at home in a folder?
rick1558 at 9:26pm 26th November 2009 I would say that all I read on extended warranties says not to buy them, yet companies are doing very well selling them. People must be closet buyers.

Anyways, I do believe they are necessary in some circumstances. Much like insurance, there is a chance of something happening that would cost you money on products you buy. Extended warranties cover these problems.

I bought a DVD camera for $800 that failed and costs $500 to fix. Needless to say, it would have been worth it to buy.

One must also be able to organize the extended warranty and find it when they need it.

Check out warrantylife.com
1. Tony K. at 5:39pm 20th August 2010 Yeah i would say that warranties should either come free like at www.econram.com where you get a 2 year extended warranty at no charge!
jk at 6:05pm 25th November 2009 Absolutely Right! I never get them anymore. Last time I did, years ago, it was more hassle than it was worth.