Extended Warranty: Worth the Cost?

Lots of comments to my post asking if extended warranties are worth their cost. I'd like to share a few of them with you today. We'll start with a comment that summarizes many people's feelings:

I never buy the extended warranty based on the principle of the matter. I remember when warranties were free and represented the company's good faith promise to deliver a quality product. In the last few years the general quality of most products has plummeted. I don't feel I should have to pay extra for an inferior product.

To me, it's not that you're buying an inferior product, it's just that you may want to ensure that it lasts a bit longer. That thought was echoed by the second commenter:

Extended warranty is basically insurance against having to pay repair costs. The person selling you this insurance has to make money on it (otherwise they wouldn't sell it), so on average, they take in more money in insurance premiums than they pay out in warranty repair costs. All the consumer reports studies do is confirm this economic fact. So if the average service call for your treadmill costs $150, and you pay $75 for a 2-year extended warranty, the odds are less than 1 in 2 that you will ever need to use the warranty.

I think the main argument for getting an extended warranty is that you might not be able to afford the repairs. If your laptop goes up in smoke a week after its warranty expires, would you be able to pay for a replacement? If not, the extended warranty may be for you. But in the long run, having an emergency fund to take care of these kind of unexpected repairs is better financially than paying someone else for laptop insurance.

Next, the voice of experience speaks:

A few years back my husband bought me an expensive computer monitor and got the extended warranty. Believe it or not, within one week of the expiration of the extension my monitor stopped working. I called the warranty company, they sent me a label to send the monitor back, and they sent me a check for the entire purchase price. I couldn't believe it - something that finally worked as advertised!

Next, someone added on to my comment about my elliptical:

The mention of an elliptical trainer hit home. We bought an elliptical trainer from Sears and bought a five-year extended warranty on it. This turned out to be a good thing, because the shaft on which the flywheel turns broke -- twice -- and the whole machine had to be replaced -- twice. We saved beaucoup bucks on that deal. The warranty also includes having a repair person come out once a year and do a tune-up on the machine. Thank you, Sears!

I reckon the reason they can still make money on a warranty is that most folks who buy a strider with the best of intentions end up letting the thing collect dust after a couple of weeks. Ours, however, gets frequent use when the weather doesn't permit walking.

This is the same experience I've had with my elliptical -- I've had it for a few months and have had two service calls already -- already paying for the extended warranty.

In the end, I think it's a case-by-case decision. I usually do NOT buy the warranty. Instead, I check Consumer Reports and buy products that have great repair records. However, where it makes sense, I do go with the warranty. With my elliptical, the cost of the warranty was the same as the savings off the regular price, so we got it for "free." And it's a virtual guarantee that we'll have a working machine for three years. Since we bought a low-end machine (versus spend $2,000 for one), we thought this was a good move.

What about you? What are your thoughts/experiences with extended warranties?

Comments

[annab]

It's a good idea to do the homework first (like reading CR) and then making the decision. I bought an extended warrantee on my car...but I drive a japanese model with a really good reputation...so it wasn't the smartest move. I wish I hadn't, and I won't in future.