Extended Warranty: Do You Really Need One?Whether or not you choose to get an extended warranty to accompany a major purchase is subjective and always a matter for discussion. What I want to share with you, our valued readers here at LockerGnome, are some of my experiences in purchasing extended warranties. I will also be sharing the experiences of others I know and how the extended warranty worked or did not work for them.

Usually the manufacturer’s warranty is sufficient for most items that we purchase. Most warranties for appliances or electronics come with a one-year warranty that will protect us from premature failures. Automobiles will offer a three-year/36,000 mile warranty up to 10-year/100,000 powertrain warranty from companies like Kia and Hyundai. What the manufacturers of products have learned are two things:

  • Their products will normally last the warranty period that they offer for free.
  • Their products will usually perform satisfactorily, without failure, even during extended warranty periods.

This is not to say that some products will actually fail during the free or extended warranties. So how can you guess whether your product could fail or not during the extended warranty period?

You mainly want to determine the exclusions and gotchas associated with any extended warranty. A good friend of mine found out the hard way what the exclusions and gotchas were after paying $1,500 for an extended warranty on his vehicle. His alternator stopped working, so knowing he had insurance, he went to a dealer to get a new one installed, priced at around $400. Not so fast, said the insurance company; read your fine print. You get a rebuilt alternator — not new — plus you pay a $50 deductible. He could have saved himself $1,100 or more by not getting the policy.

With some consumer electronics, you have the depreciation factor to deal with. Let us say that you buy a new HDTV this year for $1,000. In a few years, a similar set may only cost $500, plus the new HDTVs will probably have many new features that you may wish you had. I bought two policies for two new plasma HDTVs about five years ago for $150 each. I have never had any problems with either TV and spent $300 for nothing. Is this statement really true?

Another good friend of mine bought a DLP HDTV that, five years ago, was state of the art. He paid about $300 for an extended warranty and had his television fixed three times during the warranty period. His total for repairs — without the warranty — would have been approximately $1,200, so he came out way ahead of the warranty game.

According to Consumer Reports, when it comes to buying extended warranties for vehicles, it indicates that these type of policies are “a high-priced gamble and should be avoided.” Even when it comes to electronics and appliances, Consumer Reports does not fully recommend that consumers buy an extended warranty. Products have become very reliable over the years and most of us will not need an extended warranty, or in some cases by not buying one, the money saved can be used toward paying for a repair yourself.

Some cash back credit cards will actually double the manufacturer’s warranty for you without charging you one single cent. Check with your credit card company to determine if the company provides this service free of charge.

Comments are welcome.

Source: Consumers Reports for appliances and Consumer Reports for vehicles.

CC licensed Flickr photo above shared by Thomas Hawk