When to Buy a Warranty

Smart Money has a piece on when it makes financial sense to buy a product warranty. Their list:

• If you are not tech savvy.
• If you are clumsy
• If you are heavily using the item.
• Your gadget is cutting-edge.
• Your gadget is refurbished.
• Your gadget is pricey.
• Your gadget is prone to problems.

This seems like a fairly good list to me, though I wouldn't buy a warranty in some of these cases. Here's what I do:

1. I start by researching products with Consumer Reports. I look for value -- something that I can get that has a history of good reliability and also comes with a decent price. Surprisingly, there's always something that's highly rated that's fairly inexpensive.

2. I also try to purchase the item from a retailer I know will stand behind it if there's a problem. In particular, I've had good experiences with Costco and Amazon. Sears...not so much.

3. When I buy the item, my standard response is to NOT take the extended warranty. In about 95% of the cases I turn the warranty down.

4. I do buy the warranty when the item is expensive and either is or could be prone to problems. For example, we bought our often-maddening elliptical without doing the Consumer Reports research first. And since it was on sale, we got the three-year warranty for "free." Good thing we did, that thing has saved us a boatload of money.

What about you? How do you decide whether or not to buy the warranty on an item?

Comments

[Free From Broke]

Expense and clumsiness play a factor for me. When I first bought my iPod I bought a three year warranty (I had another MP3 player that dropped). For my refrigerator I didn't. If the item isn't that expensive or the price will drop in a couple of years (like a computer printer)it really isn't worth it.

[Robert]

Warranties are a sucker's bet, unfortunately. They are almost pure profit for the company, which tells you they are super-overpriced. The article failed to mention the slimy tactics companies use to avoid providing any value for what you pay. Some don't kick in until after the manufacturer's warranty is over. I remember working as a phone drone for Toshiba, and having many a call where the poor customer had been blind transferred to "their personal contact in Toshiba" which was whoever picked up on the Out of Warranty line. Customers don't like to hear that their warranty is with some 3rd party company, not the manufacturer. If you're going to get a warranty, at least get one from the manufacturer, but personally I don't do that either. All the cons of insurance but not required by law. :)

[MonkeyMonk]

I almost always turn down extended warranty offers but I did decide to get an extended warranty on the used Jeep I bought from Carmax a couple of years. It was reasonably priced and extended the coverage for an additional three years. I still love my Jeep but in retrospect I'm really glad I bought the warranty because it's paid for itself twofold.

[Michael B. Rubin]

Margin for the retailer selling the warranties is extremely high (often higher than for the actual product sold). The warranty company also takes a (big) piece. Something this profitable for someone else is usually not that profitable for you.

Other questions I ask myself before routinely turning down the warranty option: Would I want a repaired 2.5 year old broken one? Or is it more likely that (in the unlikely event it breaks during the time period covered for a reason that is not one of the 57 listed exclusions) a new one (with way more bells and whistles that aren't even offered now) would cost less than I'm paying for now?

If you're confident of a good chance that will break and be covered, get something else in the first place.

[Kevin]

I never buy extended warranties, I prefer to keep the cash and bite the bullet if I need to fix or replace something. I guess you could say I self-insure. I've had really good luck with all appliances, electronics, etc. probably because I take care of them.

[Bertine]

I have only bought one extended warranty. It was for my washer/dryer combo unit (I don't mean stackable, rather one that you put the clothes in and it washes then dries it). I couldn't get a normal washer and dryer and while this machine was pretty cheap at $500, everything I read online was that it was prone to a lot of minor breaks. So I bought the extended warranty for an extra $100 and have used it once in the 9 months since I bought the machine (belt fell off). My plan is to watch them fix it so I know how to do it when it happens again.

I have no problem having bought a finicky machine because it beats carrying my clothes down three flights of stairs.