Is the extended warranty worth the extra cost?

Category: Shopping


Whenever you’re buying something expensive, you’re often asked if you’d also like to buy the extended warranty. An extended warranty is basically purchasing added protection for the item you bought, but the question is, is it worth the extra cost? This is usually just a matter of personal preference, and while an extended warranty may be worth purchasing in some situations, the following are some reasons why an extended warranty may not be worth the added expense:

They usually aren’t cost-effective

Depending on what you’re buying, you may be surprised at how much an extended warranty costs. For instance, pretend you’re buying a brand new car and you’re offered an extended one-year warranty for $2,500. What are the chances that you will need $2,500 worth of car repairs for a brand new vehicle within the first year? And what are the chances that any repairs needed won’t just be covered by the standard manufacturer’s warranty that will come with your new car automatically?

They aren’t always effective

There’s a common misunderstanding that you’re protected from anything that goes wrong if you’ve got the extended warranty, but a lot of the time, this is not so. Before you purchase an extended warranty, carefully read through the fine print. By doing this, you’ll know just what type of protection your extended warranty will offer and you can make a more informed choice.

The manufacturer’s warranty is often adequate

Just about all merchandise that is sold nowadays will come with a basic manufacturer’s warranty, which normally protects your purchase for a certain amount of time (usually one year). If something goes wrong as the result of defective assembly or faulty production, this will often happen before the standard manufacturer’s warranty is up. Significant issues tend to occur much later down the road—when both extended and standard warranty periods have run out.

Credit cards usually offer better protection

Credit cards can come with numerous benefits, such as special discounts and other perks. But another benefit of making your next big purchase with a credit card is the protection that it could offer: some credit cards will double the manufacturer’s warranty for free. If you’re using a credit card that can provide this type of protection, then there’s probably no need to buy that extended warranty.

You may never take advantage of it

Approximately 5 to 37 percent of those who invest in an extended warranty ever use it. You may be better off just saving the money you would have used to purchase an extended warranty, and use it to cover the costs for any repairs or necessary replacements, assuming it comes to that.

The value for some merchandise will depreciate

Let’s say, for instance, you buy an entertainment system for $300, and you also buy an extended one-year warranty at an additional $50. Odds are good that by the time something does break (should it ever happen), the cost of the entertainment system will have gone down anyway, and you would have been better off just purchasing a new one.

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Nothing above is meant to provide financial, legal, or tax advice. You should meet with appropriate professionals for such services.

Tags: extended warranties, large purchases, warranties

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