When Buying an Extended Warranty Makes Sense & When It Doesn't

Couple buying TVAny time you purchase a big-ticket item, be it a sofa or a refrigerator, the merchant is probably going to offer you a protection plan, sometimes called extended warranty. You know, the pseudo-insurance policy that extends the life of your warranty but also costs nearly as much as the item itself? Buying it can offer momentary peace of mind, but if you never end up using it, you may feel like a sucker. So, just when is it really worth paying up for additional protection?


Consumer savings expert Andrea Woroch explains when those pricey plans may pay off -- and when they don't.

"A popular misconception among shoppers is that extended warranties are good purchases for protecting big-ticket items, especially electronics, home appliances, and furniture," Woroch says. "When you spend a lot of money on a new item, you are often tempted to purchase that warranty to protect it. However, experts agree the manufacturer's warranty is sufficient. Not to mention, such extended warranties are filled with exclusions and may not offer the coverage you’re expecting."

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The money-saving guru says a common issue that trips up consumers is the intricacies of the plans. In other words, the devil is in the details! 

"For instance, if your appliance breaks down, will the service provider repair it on the spot or will you be left without a dishwasher or refrigerator while it’s being repaired? All questions that most people don’t know to ask," she points out.

Woroch adds that most items don’t need to be repaired within the first three years anyway, rendering the coverage unnecessary.

"What’s more, many stores use third-party service providers for their warranties so you really don’t know what type of service you’ll be getting or if this company is reliable," she notes. "Meanwhile, stores keep 50 percent or more of the cost of the warranty, making it a high-profit sale for them and an unnecessary purchase for you. Sales associates love to push and persuade shoppers to buy these warranties because many receive a commission on the sale of such coverage."

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On a positive note, you may actually have protection you're not even aware of. Woroch explains that your credit card often extends coverage for an additional year.

"So use that plastic to pay for your good," she says.

Especially when you're forking over big bucks for electronics that seem so complicated only former NASA scientists could fix them should something go awry, the temptation to purchase the protection plan is even greater. But paying for extra coverage may still be a waste of money.

"When it comes to televisions, you're usually safe to skip over this added expense," says Woroch. "While warranties do offer peace of mind, HDTVs are surprisingly reliable. What’s more, TVs have a rapid depreciation value and it will cost you less to replace down the road than to pay for that coverage."

Good to know! So, with all that in mind, is there ever a time when these plans make (dollars) and sense?

One instance in which it may be "smart" to purchase a warranty is to cover a smartphone, Woroch notes.

"Since many companies have done away with upgrades, dropping your phone may result in a really hefty price to replace. Companies like Square Trade offer reliable coverage on this type of equipment," she says.

So there you have it! As persuasive as your salesperson might be, weigh all of these factors carefully before committing to an expensive and unnecessary additional purchase.


Image via Dusan Petkovic/Shutterstock

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