http://www.youtube.com/watch?v=AyM42eieMHY&rel=0
Are extended warranties worth it? In today’s episode of Scambook TV, Kevan presents 4 reasons why consumers should just say no to extended warranties. Although it sounds like a smart investment when you’re buying an appliance or high-end electronics like a flat screen TV, most extended warranties are a waste of money.
CNET reviewers found that the cost of repairs are often cheaper or the same price as the warranty. Kevan also points out that extended warranties may not offer the damage protection you need or cover normal wear and tear. Additionally, most credit cards automatically extend the original manufacturer’s warranty by one year. But the biggest reason why you shouldn’t buy an extended warranty? Most products just don’t break!
We all know the pitch. You’re buying a new laptop, flat screen TV or even a toaster oven, and the salesperson suddenly launches into the virtues of buying an extended warranty. For an additional fee, you’ll get protection for your product beyond the original 90 day or 1 year manufacturer’s warranty. It’s a sound investment, isn’t it?
Not always. CNET and Consumer Reports reviewed several extended warranty plans and found that consumers who purchase an extended warranty seldom use them. Or, if they do use them, there are hidden costs (like fees to ship the product to the factory and back) which quickly add up and ruin the warranty’s value.
4 Reasons Why You Don’t Need an Extended Warranty
1. Repairs might be cheaper. CNET reviewed extended warranty plans for many consumer electronics, such as televisions and computers, and found that the cost of a one-time repair is often cheaper or the same price as the extended warranty.
The cost of an extended warranty may be marked up to cover the salesperson’s commissions or boost the store’s profit margin. As a result, it might make more sense to skip the extended warranty purchase and just save your money. You may never need to spend it if your product doesn’t break.
2. The extended warranty might not cover everything. Sometimes, extended warranty plans only cover manufacturing defects, not the natural wear and tear that happens from using the product. Your repairs or replacements might not be covered if the damage was caused by something other than a defect. Additionally, many extended warranties don’t cover accidents like drops or spills. Don’t be mislead by the sales pitch. If you’re buying an item that’s prone to accidental damage, such as a laptop or a cell phone, make sure you read the fine print very carefully before you consider buying a warranty.
3. Credit cards give you extra protection for free. If you’re paying with plastic, most credit cards automatically extend a product’s manufacturer warranty by one year. Depending on the terms and duration of the extended warranty offered by the store, you might not need it if you’re charging the purchase. It’s another one of the many consumer protections offered by credit card companies. Check your card holder policy or go online to your credit card company’s website for more details.
4. Most products don’t break. Statistically speaking, most products don’t need repairs. WSFA 12 News gathered some statistics from Consumer Reports to compile a list of the top consumer products most likely to need repair within the first three years:
Top consumer products most likely to need repairs within 3 years.
As you can see, desktop and laptop PCs top the list – even then, the repair rate is under 40%!
Should You Ever Buy an Extended Warranty?
Of course, there are exceptions to every rule and there may be circumstances where an extended warranty will pay off. If you’re accident-prone and tend to worry, the price of an extended warranty — even if you never use it — may be worth the peace of mind. It might also be a good idea to have extra protection for something you can’t live without, such as a refrigerator.
Or, if you’ve been researching a product and all the consumer reviews suggest buying a warranty, you might want to consider it, too. Just make sure to read the fine print so you understand what kind of damage is covered by the extended warranty.
See Also
Extended Warranty Scams
4 Reasons Why It’s Better to Use Your Credit Card for Holiday Shopping
Personal Finance 101: When You Should Pay with Debit Instead of Credit (and Vice Versa)
Great tips, I think the dealers and manufacturers that really try and push these just want a few extra bucks. Now lets have a talk on why you should not buy with a mail in rebate…;)
Kevan I know you are trying to help in your review but saying normally products don’t break almost made me gasp. Either people aren’t reporting their difficulties or there is something seriously wrong with your statistics. I have had more problems with products I’ve purchased, new products, products that received glowing reviews on consumer reports, etc than I ever have in my life. The simple fact is most of our products are made in China, China makes absolute junk. Until this stops we will keep having problems with our products. China doesn’t understand what the word quality control even means. I do agree with some of your article, most people are unaware that their Credit Cards(American Express for one)automatically extends most warranties on purchases which is a great piece of information. Thanks Kevan.
I must agree with David, I have have had lots failures with electric appliances a just after the industry standard 1 yr warranty ran out. Even most big ticket items only have a 1 year warranty, this does not say much about quality of their products. I am old enough to remember when manufactures warrantied products for several years instead of months.
I agree..
Wait a minute… you are saying that 1 in every 3 Desktop or laptops require repair in the first 3 years??? And this is not significant? When you purchase an item – any item – you expect it to last at least 3 years.
All that table tells me is that there is no such thing as quality any more.
I agree, these stats are shockingly bad.
Some make sense. Laptops are vulnerable because of the screen and user environment. PCs I’m guessing are mostly software problems; viruses, incompatible upgrades, etc.
But refrigerators and washing machines? That’s truly pathetic.
And stoves? I’ve got two gas stoves, 40 – 50 years old. In one of them I once had to replace the oven pilot sensor (which sits in the fire 24/7).
I finally retired my fully functional Maytag washer after 50+ years (and a new belt every 6-8 years) because I wanted more automatic features.
The replacement, from Sears, is already rusting around the front door after less than 4 years, but outside any extended warranty.
The modern manufacturers’ business model is to make them last just that long.
Still, they are making money off the extended warranty, which means people who buy it are, on average, losing.
[…] post is in response to the Scambooks blog post about problems with extended […]
I think this article takes the same biased view point as almost every article every written about extended warranties.
I wrote a blog post in response to this article/video to hopefully help consumers to make better decisions about if they should buy an extended warranty. I do not think everyone should buy one by default but everyone should have unbiased information to help them make the right decision about what is right for them.
Would love your views on my post
http://extendedwarrantycomparison.co.uk/problems-with-extended-warranties-scambooks/