Should you shell out for an extended warranty? We ask an expert

When you buy a new smartphone, TV, or laptop there’s a good chance that you’ll be offered an extended warranty. In-store sales staff often push extended warranties hard for consumer electronics. Is it because they fear you’ll damage your device and be left without coverage, or is it because extended warranties are hugely profitable for them? We decided to ask an expert.

“Our reader surveys have shown time and again that extended warranties are not a good deal for most consumers,” says Glenn Derene, electronics editor for Consumer Reports. “Many products are reliable and don’t break during the period covered, and the plans cost as much as you’d pay for a repair that might never be required.”

But there are instances when you might want one.

Some people feel more comfortable knowing they are covered. If you feel it’s likely you’ll need extra support or cover for accidental damage, then some extended warranties or coverage might be a good deal for you.

“It’s worth considering Apple’s extended warranty/service plan if you want phone or online support for more than the standard 90 days. Apple consistently stands out in our surveys for offering the best computer tech support in the business.” explained Derene. “Though we generally don’t recommend extended warranties, you might want one for a computer, especially if it covers accidental damage.”

What about smartphone insurance?

We’ve seen various studies over the years suggesting that anywhere from 30 to 50 percent of smartphones fall victim to some kind of accident, from a simple scratch on the screen or body to a dunking in the toilet or a cracked display after a fall.

“Surveys have shown time and again that extended warranties are not a good deal for most consumers.”

“When it comes to smartphones, extra-cost insurance or warranties may seem like sensible protection for the day your phone breaks or leaves you unexpectedly, but neither tends to pay off,” said Derene. “In Consumer Reports polling, only 15 percent of buyers had acquired a new phone because the old one broke. Monthly insurance premiums for smartphones are typically $10 or more, with deductibles well north of $100. Skip the extended warranties, as well. They have similarly high up-front costs and service deductibles.”

The high cost, and low likelihood of encountering a problem you can actually claim for, are not the only reasons to avoid phone insurance or extended warranties.

“If you do make a claim, don’t expect a new version of your old phone. Insurance plans might replace your phone with a refurbished, equivalent model,” Derene explained. “We say keep your old phone, that way you’ll have it to use as backup in case your newer phone breaks or is lost or stolen.”

How about PCs, TVs, and cameras?

The chances that you’ll actually require a repair are fairly low. According to Consumer Reports survey data, they break down like this:

  • PCs (laptops, desktops, notebooks) have a 24 percent repair rate
  • TVs have a 7 percent repair rate
  • Point-and-shoot cameras have a 5 percent repair rate
  • SLRs have an 8 percent repair rate

Another important issue to keep in mind is that, even with an extended warranty, you may not be covered for the issue you encounter, and the repairs people actually get often leave them feeling unsatisfied.

“Only 15 percent of products in our survey were covered by the manufacturer’s regular warranty when they broke, and about 10 percent were under a service contract or extended warranty,” says Derene. “People who had a service contract or an extended warranty weren’t any happier with their repairs. They actually were more likely to have had repairs done incorrectly the first time around and waited at least two weeks for the repair than people who didn’t have those contracts.”

Next page: You may already have coverage, and not know it

Maybe you’re already covered

Before you pull the trigger on an extended warranty deal or insurance, it’s worth checking whether you’re already covered. There’s always a standard warranty agreement and sometimes manufacturers offer extra coverage at no extra cost if you register with them. Credit cards can also extend coverage in some circumstances by up to a year, and some bank accounts offer things like phone insurance at no extra cost.

“Beware, because of commissions or corporate pressure to sell warranties, salespeople might exaggerate the extent of the coverage or fail to point out the fine-print limitations,” argued Derene. “We found plenty of contract-related consumer complaints on online message boards.”

You may find that the extended warranty actually offers little or nothing over the standard warranty.

You may find that the extended warranty actually offers little or nothing over the standard warranty, and it can prove difficult to claim.

“Some of those who tried making a claim reported having to wait on hold for long periods only to be told that there was no repair shop near them or no record of their contract. Some people reported waiting weeks for repairs or having claims denied because the damage was deemed to be their fault. And some said their plan began on the purchase date, covering much of the same period as the manufacturer’s warranty.”

The fear of having to pay out for a big repair is what drives many people to buy extended warranties, but it may be a false economy. Consumer Reports found that the median cost for the contract or extended warranty was $136, but the median cost for repairs was $152. So even if the worst does happen it won’t necessarily cost you much more to fix than you paid for the extended warranty.

Keep in mind that you’re unlikely to need a repair because reliability rates are improving, and that extended warranty looks a lot less attractive.

What’s the alternative?

The first thing to do is to avoid buying a lemon in the first place. Check reviews carefully before you buy a new product. There’s lot of information out there. Digital Trends regularly reviews electronics of all types, Consumer Reports even has lists of “What Breaks and What Doesn’t,” and there’s a similar service provided if you’re in the United Kingdom.

You could also save money by starting an emergency fund. If you put the same amount of money into a savings account as you’d otherwise spend on an extended warranty, there’s a good chance you’d never need to use it. But if you do, then it can go toward a repair or replacement.

What if the worst does happen? You could always get the toolbox and do it yourself. That’s what 31 percent of people who weren’t covered by a warranty did, in the Consumer Reports survey. Just make sure that you check to see if you’re still under warranty before you do this, because you’ll probably void it with a self-repair attempt.

“The prevalence of how-to videos on YouTube and other sites—such as RepairClinic.com, which itself hosts more than 1,400 videos—makes repairing even complicated appliances a much less formidable challenge,” suggests Glenn.

The last thing to consider is whether the repair is worth it at all, or should you be thinking about a replacement. Although there’s evidence that products are breaking less, Consumer Reports has found that when they do break problems tend to be serious.

“Don’t spend more than 50 percent of the cost of a new product on repairing an old one,” says Glenn. “And if an item has already broken down once before, replacement may make more sense.”

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