Black Friday deals are everywhere today. When you buy that new LCD tv, Galaxy phone or iPad, you’ll be asked if you’d like to buy something that’s not on sale – the extended warranty. It’s only natural to worry about possible repair bills if that big ticket item breaks or stops working. With most of these items you will get pitched an extended warranty, and usually you will get the pitch more than once. Extended warranties are expensive but tempting when faced with the thought of having to pay the full cost of replacement for the item if it were to break. But are you saving money in the long run by buying the extended warranty?
The obvious benefit of the warranty is that it will give you added protection. Most items will come with a general manufacturer’s warranty, often up to 1 year. Sometimes the store selling will extend that warranty another 90 days, but most of the time they will sell a warranty. These warranties are pitched as though they are protecting the consumer, however, the biggest thing they are selling is peace of mind.
The biggest downside is the cost. These warranties do not come cheap, often costing as much as a third of the purchase price. Combine that with the fact that repairs and replacements are rarely needed and the benefits of buying the extended warranty are greatly diminished. Throw in the fact that if you make your purchase with a credit card you usually get an extra 1 year warranty and often double the manufacturer’s warranty and it seems that nobody would ever bother getting one.
Most quality items will come with a manufacturer’s warranty. They usually last for at least a few months, commonly a year, and sometimes for the life of the product. The manufacturer and the store selling the item know how long it will take to wear out, and the average lifespan of the product is always past the period when the extended warranty would end. There is really not much of a reason to pay for the extra warranty when your credit card will provide adequate coverage (before relying on this, call your credit card issuer and find out if this coverage is actually available, not all companies offer it). The extended warranties are often much too expensive for the coverage you receive.
When making those larger purchases it is nerve wracking to wonder what might happen to your new purchase in the coming months and years. If you need this peace-of-mind, then an extended warranty may be able to provide it, for a cost. However, the bottom line is: most extended warranties do not provide enough benefit to justify their high ticket price.