Extended Warranties: When are they worth it?

All right, I’ll admit it, I’m a real cynic. I always think there’s a hidden agenda and I always think there may be a scam hiding in every offer made by a retail business. So, when I purchase an electronic gadget and get offered the extended warranty, my suspicion is automatically aroused.

Are extended warranties an obvious money grabbing scam or are they actually worth it?

According to consumerreports.org, you should skip the service plan on purchases like electronics and appliances. Among the reasons they give for their position, they mention that products rarely break within the warranty period and the fact that some repairs may already be covered by the manufacturer’s basic warranty on the product.

If these plans are such a scam, why are major retailers, with precious reputations to protect, offering them on such a regular basis? I did some additional research and found these scenarios where having bought the extended warranty will save you time, effort, and money.

Repairs Outside The Manufacturer’s Warranty

warrantyMost manufacturers’ warranties are pretty sparse to begin with and some products are more likely to need repairs than others. To help make the decision regarding whether or not an extended warranty will be worth it, you should familiarize yourself with the manufacturer’s warranty. Once you know what’s covered or not, you can make some common sense assessments about what else may or may not break on your product while you own it.

You can also ask your friends, who have bought similar items, what repairs theirs have needed since they’ve bought them. Find out what the most common complaints are about certain products or certain brands and then compare those to the manufacturer’s warranty.

When Products Are Cheaply Made

warrantyFurther to educating yourself about the manufacturer’s coverage, you should also take a look inside your product, when feasible, to see how it’s made. For example, if I had taken a closer look at my dishwasher when I bought it, I would have noticed that the brackets holding up the top rack are made of all-plastic parts that get a lot of wear and tear as you roll the top rack back and forth. If I would have thought that through for a minute, I would have realized that those plastic moving parts weren’t likely to hold up to all that action. If I would have bought the extended warranty on my dishwasher, and made sure those plastic parts were covered under the plan, I would have saved myself hundreds of dollars by now. I have replaced those particular parts twice in the last three years and anticipate replacing them many more times during the life of the appliance.

When Products May Outlast The Warranty Period

warrantyAs in my dishwasher example, some products you can expect to own for many, many years. Other things, like electronics, where their technology gets obsolete fast, you probably wouldn’t even own them long enough to see the entire extended warranty period through. Make sure you take the reasonable expectation of how long you’ll own the product into account when assessing the worth of a service plan on it.

When Repairs Or Parts Are Expensive

warrantyThings like batteries, specialized parts, and especially labor can be very expensive. When you’re considering an extended plan on a product, take a moment to educate yourself on how expensive the thing is to fix in the first place. You may have to replace a cheap part 10 times in order to get your money out of a service plan on a small electronic gadget, but one part on a foreign car could make the whole thing pay for itself.

When Products Rate Low For Reliability

warrantyCheck out the consumer reports studies done on the brand you’re looking at buying. Certain brands are known for unreliability, but may have other redeeming qualities. In that case, buying the extended warranty could be the way to go. You can rest easy, knowing that when the unreliable part breaks, you’re covered, making the other benefits of the product worthwhile, despite its reputation for needing repairs.

When Buying A Used Product


Sometimes you can buy an extended warranty on a reconditioned or pre-owned product. Again, taking into account all the above criteria, it may not be a bad idea to have the extra coverage, especially for big ticket items that may require more expensive repairs or have more potential for breakage, like cars and houses. Buying the extended coverage may buy you peace of mind to reduce the stress of purchasing a used item in the first place.

All that being said, the secret to making the right decision, when it comes to extended warranties, is to educate yourself on the product. Know what’s already covered by the manufacturer’s warranty and by your credit card’s warranty, familiarize yourself with the moving parts of the product, ask your friends what they think of the product, and know how much it would otherwise cost you to repair it yourself. After you’ve done this rudimentary amount of research, you can breathe easy, knowing you’re covered.