To properly answer this question, customers must analyze the specific situation of the purchase. What works for one customer may be a waste of money for another customer with different circumstances.
How Much is the Product?
Extended warranties make more financial sense if the product is expensive. Lower priced products can often be replaced for less expense than a repair. Repairs for more expensive products cost more than those for less expensive products.
How Much is the Extended Warranty?
Some experts say that if the cost of the extended warranty is more than 20% of the purchase price, it is not worth the expense. A repair will typically be less than the price of the extended warranty. When shopping for products, it makes good financial sense to compare costs of extended warranties. The price of extended warranties can vary from store to store, so include that cost in your consideration of where to buy a product.
What is the Product?
Extended warranties are a better bet for some products than they are for others. For example, more than
20% of the following items purchased by consumers require repair within three years of their initial sale:
- Desktop PC
- Laptop PC
- Refrigerator
- Washing machine
On the other hand, less than 20% of the following products typically need a repair in the first three years of ownership:
- Projection TV
- Digital camera
- Vacuum cleaner
- Clothes dryer
- Dishwasher
- Camcorder
- Microwave oven
Four More Things you Need to Know about Insurance and Extended Warranties:
Besides price and risk, here are four things you need to know so you can make an informed choice on an extended warranty:
- Term of coverage. Does it overlap the regular product warranty? If so, why pay for something you already have? If the extended warranty is for three years, and the regular warranty is for
- Alternatives. Does your credit card provide an extended warranty as a benefit for using the card? If so, what are the circumstances of that offer?
