Money Mistake Monday – Buying The Extended Warranty Syndrome.

Photo by jpockele

One of the things that I used to do when I went shopping for electronics was to buy the extended warranties. Since a normal warranty on an electronic device is normally 1 year, buying the extended warranty gives you piece of mind for an additional 2 years or so, right? And it can be yours for only $139.95! No thanks. I stopped doing this years ago after I realized that either A. everything I bought lasted a very long time with no issues or B. I replaced whatever I bought before I would have even finished the extended warranty period!

Retail stores make a ton of money selling you these extended warranties on everything from plasma TV’s all the way down to a cheap set of headphones. And while I can agree that you might want to think about an extended warranty if you are buying a $7,000 television, for anything in the “sane” price bracket, I would skip the warranty if I were you. Chances are that the product will not break, and even if it did, it would probably be because of something you did – which the extended warranty would not cover. These warranties are not offered by the manufacturer – the are from the retailers themselves. The manufacturer would not want to sell you a product that would break so easily, as word gets around easily nowadays about cheap and crappy products. Do you think Sony wants to sell you a TV that stops working after 13 months? No way…it doesn’t make for good PR.

I have bought a lot of high-ticket items over the years (although no $7,000 TV) – iPods, computers, expensive cell phones, stereo systems, satellite radio units – and not once have I bought the extended warranty for any of them. And not once have I needed it, either. So be careful and choose wisely when the salesman tries to sell you the extended warranty, as I would skip it except on the most expensive items you could buy…but even then I might skip it. It’s an added expense that you probably don’t need to pay for!

Like this article? Please consider subscribing to my full feed RSS. Or, if you would prefer, you can subscribe by Email and have new posts sent directly to your inbox by entering your email address in the box below. Your email will only be used to deliver a daily email and you can unsubscribe at any time.

Comments (14)

Trackback URL | Comments RSS Feed

  1. Randall says:

    One thing

    I don’t get extended warranties either, but in this case I should have. I’ve got a cracked lcd from two rambunctious boys that I have to have fixed today. Not looking forward to the cost.

  2. Christopher says:

    I’ll note the previous commenter’s broken laptop would probably not be covered anyway. One thing that’s important to consider is that though these warrantees are being sold by the retailer, they’re generally administered by a third party vendor. The retailer is making from 40% to 80% profit on the sale (according to Consumer Reports) and the administrator is still in business, so your chances of getting your money’s worth are pretty low indeed.

  3. david says:

    The extended warranty does nothing if you break an item, only if it is defective. Insurance, on the other hand, would be worth it. 🙂

  4. Tim says:

    two other alternatives: use a credit card that extends the manufacturer’s warranty and/or has a lemon policy; check with your home owner’s/renter’s insurance to see if things are also covered.

  5. Patrick says:

    I agree. I only bought an extended warranty one time, and that was for a laptop that I bought right before going on a worldwide tour while I was in the USAF. The laptop was packed in a suitcase, loaded on baggage pallets, stuffed under airplane and bus seats, carried through the heat of the Middle East and the frozen cold of an Alaskan winter… and never had a problem. 🙂

    I would still buy the warranty if I knew I would be going through all that. Otherwise, no thanks. 😉

    I like the theme update. Very clean.

  6. WealthBoy says:

    I can’t stand it when they try to sell you the extended warranties! If the product is worth a damn, why do you need an extended warranty? If you do need the extended warranty, why are they selling you a piece of crap?

  7. Coupon Guy says:

    Only time I ever got my money out of an extended warranty was with a cordless phone from Best Buy. My kids or I would drop it and something would go wrong with it, we took it back 3 or 4 times over the course of 3 years. New phone every time.

  8. […] My 2 Dollars explains one of his money mistakes: buying extended warranties. […]

  9. My sister used to work for an electronics store. She told me the most commissions came from the extended warranties they got people to sign up for.

    That said you have to look at the details of the warranty that is offered. A few years ago I bought a Best Buy warranty for my iPod. My previous MP3 player fell and was never useful after. This warranty though would replace my ipod if I had any problems with it. It wouldn’t have to be sent for repairs; they just give you a new box and take your old player. Well, at the end of the warranty my ipod was locking up a lot so I brought it in. Since they didn’t make that model anymore they had to upgrade me to a higher memory model and they gave me credit on the price difference. Unfortunately they don’t offer that specific warranty anymore. Probably too many people returned their player for a new one.

    Most warranties aren’t worth it but you have to know how the item will be used, the terms of the warranty, and what the warranty costs.

  10. rambkowalczyk says:

    Generally agree, but if you buy an exercise machine (bike, elliptical machine etc) and consistantly use it day in and day out, the extended warranty is worth it.

  11. […] My Two Dollars – Money Mistake Monday – Buying The Extended Warranty Syndrome. […]

  12. […] Two Dollars talks about why people lose by buying extended warranty!  Personally, I’ve purchased extended warranty twice which have been a complete […]

  13. […] from My Two Dollars presents Money Mistake Monday – Buying The Extended Warranty Syndrome.. Most of the time, signing up for an extended warranty is like saying “yes, I would like to […]

  14. […] extended warranty is not always a good deal and you should consider whether you need it or not before purchasing it. If you have good knowledge […]