Forum: money.stackexchange.com
Tags: <shopping><extended-warranty>
Title: When buying expensive electronics is it worth getting the extended warranty?
Question: When shopping for big budget items like TV's and appliances, the resellers (e.g. Best Buy, FutureShop) will often sell an extended warranty that covers the product well beyond the manufacturer's warranty.  Is this worth spending the money?

Answers:
sents: text: Even without analyzing the math or doing a complete risk assesment, consider the following: They wouldn't be doing such a hardsell if these warranties weren't abig profit center for the companiesthat
text: offer them Extended warranties are essentially insurance policies.
text: Insurance policies generally only make sense to protect you from major financial hardship by transferring risk to the company issuing the insurance.
text: I wouldn't buy insurance or a warranty on anything unless the cost or repairing/replacing it
text: wouldn't put me in a bad way with my finances.
text: When you buy these you are bettingthat the cost of the warranty will be less than the cost of anyreplacement/repair cost, the companyoffering it is betting on the otherside of the equation AND they set theprice.
text: Consider who in thistransaction has better informationabout repair/replacement costs forthe item.
text: Hint:
text: It isn't you.
answer_details: author: money.stackexchange.com/users/149/JohnFx
score: 16
sents: text: My knee-jerk reaction was "no, they are not worth it", but I took a little time to look up what some of the trusted names in consumer electronics reviews had to say about extended warranties/service contracts.
text: A cnet writer said that your decision should consider the price of the service contract relative to the price of the item you're buying, as well as the amount of hassle you're willing to endure, should something go wrong.
text: Consumer Reports believes that the warranties that come with your products are almost always enough, and they say that electronics and appliances are so well-built nowadays, the likelihood of you needing extra service before you upgrade are slim-to-none.
text: And the folks over at epinions.com offer the same
text: maybe-yes-
text: maybe-
text: no advice as the cnet guys: depends on your appetite for risk and the options available to you.
text: So I would suggest that the answer be "no" most of the time, but consider it anyway.
answer_details: author: money.stackexchange.com/users/14/Nat_Rea
score: 13
sents: text: I worked for a major retailer that offered such extended warranties.
text: Our profit margin on these "product protection plans" was ~80%.
text: That should tell you something about how much they are "worth" to the consumer.
answer_details: author: money.stackexchange.com/users/402/myron-semack
score: 10
sents: text: I was just reading Consumer Reports ' December 2009 issue.
text: The issue's focus is electronics, and there was a small section on extended warranties in the "Best electronics" article.
text: Here's what they said: Extended warranties still aren't worth buying Seven in 10 respondents to our survey on buying major electronics reported they were pitched an extended warrranty.
text: However hard they're sold, extended warranties are generally bad investments.
text: Most electronics products won't need a repair, especially if you choose brands that have fared better than others in the reliability ratings we include in this section.
text: In the unlikely event they break, other Consumer Reports survey data has shown, the average repair bill is often comparable with the cost of a warranty.
text: However, buying a plan that includes accidental damage might be worth considering for a laptop or netbook that you'll use a lot on the go.
text: And buying a computer warranty that extends tech support, too, might make sense if you or a gift recipient could use a lot of hand-holding. [...]
text: Paying with your credit card might automatically double the manufacturers' warranty and offer other benefits at no extra cost [...]
text: BTW, I like Consumer Reports
text: and I am a long-time subscriber.
text: Check them out if you haven't before.
answer_details: author: money.stackexchange.com/users/3/Chris W. Rea
score: 6
sents: text: In my opinion it depends on the type of product.
text: I would get a warranty for a washing machine or tumble dryer or other product with lots of moving parts that is liable to break down.
text: I also take into account my luck, the one washing machine I didn't get covered broke down 2 weeks outside the normal warranty period...
text: I would not get a warranty for a consumer electronics product like a TV, PC, or iPod because they devalue so quickly.
text: As a rule of thumb, if the model you buy today is going to be on sale for the next few years for around the same price and has moving parts, it is worth considering a warranty.
text: If it will be worth a small percentage of its value because newer faster shinier models come along to replace it don't bother.
text: I would also not get the warranty from the shop I bought the product from.
text: You can get warranties for consumer products from specialist third parties that will allow you to cover multiple products for a discount.
text: These work out a lot cheaper than the one the shop will give you.
text: For example in the UK, DomGen will cover 3 appliances for £14.99/month and 6 for £20.99/month
answer_details: author: money.stackexchange.com/users/32/Rich Seller
score: 4
sents: text: To take a higher level view of this, consider the warranty as buying insurance.
text: They want to sell you the warranty because there's profit in it for them over the aggregate of all the warranties they sell.
text: So ask yourself, would having to replace this item out of your own pocket
text: cause you a significant financial burden?
text: Items like houses we insure because we can't afford to lose the investment.
text: Items like cars
text: we get liability insurance because we can't afford to pay for another person's medical costs if we're liable for their injury.
text: On the other hand, if you're talking about a $1000 piece of equipment in your house, this won't break you.
text: That means you can self-insure, and if you do that for all the items you purchase, over the long haul, then you will save money (equal to the profit that the company expects on the warranties).
text: So I say, no, don't buy extended warranties.
text: The more they're trying to sell it to you, the less you should be willing to buy it (because the higher their profit margin is if they can convince you to buy it).
answer_details: author: money.stackexchange.com/users/35/Scott Whitlock
score: 4
sents: text: The issuer of the service contract is making money.
text: DO NOT buy these contracts.
text: Self insure over your life time 40/60 years and you will save money.
answer_details: author: money.stackexchange.com/users/None/
score: 3

Summary of the answers:
Consumer Reports believes that the warranties that come with the products are almost always enough. It might be worth it for a washing machine or any product with moving parts that is more liable to break down. 
The answer to this question will depend on the product, the cost to replace it and how much you're willing to put up with if it breaks. However, generally, people would advise taking an extended warranty out on items that have a lot of moving parts whilst not bothering for electronic goods.