When Extended Warranties Do and Don’t Make Sense

Gaming systems, iPods, computers and appliances can top holiday wish lists.  But what if they break?

Extended warranties are options for those who want to play it safe, but many wonder if they're worth the money.

"Buyers, beware," say most consumer advocates, who call extended warranties nothing more than huge profit centers for businesses.  But they can make sense.

"You don't know what may happen.  It's an investment," said shopper Rashidi Baruti.

Retailers say an extended warranty is basically an insurance plan.  Best Buy manager Eric Medina said 60 percent of those that buy a warranty ultimately end up using it.

"Maybe the buttons go out on your mp3 or headphones out on some sort of iPod that you have, whether the screen goes out on your computer," he said, listing reasons why a warranty may make sense.  "We offer piece of mind so if something does go wrong with your product you can take it in and we take care of it for you."

Extended warranties can cost 10 to 50 percent of the item's price, which can also be the price of a single repair itself.  That’s why many take their chances.

Best Buy sells extended laptop warranties for $79, but says repairs for batteries and screens can cost much more from $90 to $300, so they always recommend one.

Generally the bigger ticket items with bigger repair and replacement bills are popular with consumers.  Get a Subzero refrigerator costing thousands of dollars and you don’t want to get stuck having to replace or repair it. 

For those items, consumer advocates say extended warranties are worth checking out. 

Overall, repair experts with RepairClinic.com say most of the time electronics break within the first year when the original warranty is still in effect.

But what about the odds of needing a repair in 3 years?

Consumer Reports says computers, desktops and laptops top the repair rate in the 30 percent range. Washers and dryers have a repair rate of 13 percent.  Digital Cameras and televisions fall within the 5 to 8 percent repair rate range.

With constant use, however, that rate goes up.

Best Buy says they see repair rates rise on gaming devices that get more than four hours of  TV use per day.

Consumer review website Angie's List offer these tips in shopping for the right warranty:

  • Check the Terms: most extended warranties don't cover accidental damage.
  • Read the Fine Print: Is the authorized repair center convenient? What is the hassle-factor?
  • Know Your Options:  Check with your credit card company.  Often they offer their own warranty extensions when you use their card.  Homeowners Insurance may cover accidental damage as well, something not usually covered under warranty.
  • Shop Around:  Just like product prices, different retailers offer different prices on their extended warranties. 
  • Research the product:  Are you buying something with a good track record

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