Are Extended Warranties Worth It?

Every electronic shop in the world pushes extended warranties. In fact, at the big chains, employees earn bonuses for selling an extended warranty to a customer. That in and of itself doesn't mean an extended warranty is a bad thing -- many companies encourage sales through commissions and bonuses. But it does beg the question, why the focus on getting customers to buy extended warranty services?

At least part of the answer is, companies make a lot of money off extended warranties. The thing is that when you buy a new electronic, it's already covered by a warranty. Most of the time, you won't have to use that warranty. If the product is so bad that everyone needs to use the warranty, the company will fix it, because they will lose money paying for repairs.

The same applies for extended warranties. Very few people will need to use them. So if you pay $100 for an extended warranty, well, that's more or less money in the manufacturers' pockets.

When are extended warranties worth it?

There are times when you might feel that it's worth your time to buy extended warranty services. When you're making the decision, many salespeople try to pressure you with the quick sale. They rattle off some horror stories to get you to commit at the time of purchase. The best way to avoid this is to go into the situation with the decision already made: will you buy an extended warranty or not?

When deciding, consider the following questions:

-How long do you expect the product to last? If it's something you'll probably replace in a year or two, there's no point in extended warranties.

-How much does it cost to repair the item? Is it more or less than the warranty cost?

-How roughly do you use the product? How likely is it to break? Online reviews can help you here by warning you about the reliability of the product.

-What is the cost of the warranty in proportion to the cost of the item? If you buy a TV for $500 and the cost of the extended warranty is $250, you're already halfway to a new television. In that case, it's probably not worth the cost.

-What does the extended warranty include? Some offer almost no protection and count on you being too rushed to read the fine print.

There's no simple answer to the question are extended warranties worth it, but there are general guidelines. If you're buying a large investment, such as a new car that you expect to last for many years, or large appliances, it may be worth your time and money to consider an extended warranty. But for most electronics purchases, extended warranties are simply ways to pad manufacturers' wallets.

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