Do you need an extended warranty on that new TV or computer?

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Do you need an extended warranty on that new TV or computer?

Deep down inside, you knew that extended warranty you bought for your new flat-screen TV was probably money down the drain but you caved under the onslaught of a high-pressure sales pitch. It couldn’t be all that bad of an idea, right? What if something really did go wrong?

The problem with extended warranties for big-ticket electronic items is that something rarely, if ever, does actually go wrong. When electronics and appliances do break, according to Consumer Reports, the average repair cost isn’t much more than what you paid for a service plan or warranty—a median difference of a paltry $16.

As it turns out, extended warranties rarely get used. Even when they do get pressed into service, they’re frequently not worth their value. Consumer Reports notes that repairs covered by warranties tended to be more troublesome than repairs covered by owners out of pocket. Warranty repairs were more likely to take two weeks or more, and they were more likely to need to be re-done. Yikes!

Beyond those concerns, you’ll find that most big-ticket electronic purchases already carry sufficient warranty protection.

  1. Store returns and exchanges: Most retail stores allow you to return and exchange products that don’t work correctly within the first 14 to 30 days.
  2. Manufacturer warranties: Major electronic purchases almost always come with an original manufacturer’s warranty. This coverage picks up where the stores return and exchange policy leaves off, and generally runs one or two years.
  3. Credit card warranty extensions: Many credit cards offer free extended warranties on anything you purchase with that credit card. When you buy something with your PenFed Platinum Rewards Visa Signature Card, you get double the manufacturer’s warranty coverage (up to one additional year on eligible U.S. warranties of three years or less), plus easy warranty registration and other time and money-saving conveniences.What’s more, PenFed reimburses you within the first 90 days from the date of purchase if your item is stolen or damaged by fire, vandalism, certain weather conditions or accidental discharge in water.

How can you judge whether an extended warranty might be worth the money?

Consider the product’s reliability and natural lifespan. Most laptops and computers today are fairly reliable, and by the time something does go wrong, you’re likely to want to upgrade to a cheaper, more powerful model. If your TV goes on the fritz in three or four years, will you want to repair it, or are you more likely to want to shop around for a newer model with more features?

If you do decide to chip in for an extended warranty, consider its price relative to the product’s cost. The Service Contract Industry Council suggests that any warranty that costs more than 20 percent of the product’s price isn’t worth the money. For phones and tablets, think twice about any plan whose price approaches half the product’s retail price.

Ultimately, most shoppers who open their wallets to buy extended warranties don’t do it because they’re anxious their purchase won’t hold up; they do it because they’re afraid they will feel silly if something does happen and they get caught without coverage. It’s an emotional defense, not a rational choice.

Still, if plunking down an extra $100 or so for an extended warranty helps you sleep better at night, by all means set your mind at rest. If not, you’ll probably find that you will sleep just fine anyway—and with your new gadget humming along right next to you.

Posted in: Personal Finance, Saving Money
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