Ron Schenone

Are Extended Warranties A Good Or Bad Investment?

Posted by on Mar 17, 2008 | 6 Comments

I received an email this morning in which the writer explained the following situation. They had purchased an HP computer from Staples, which, from the description, sounded like a low end system in the $400 range. Near the end of the one-year warranty, a screen appeared asking if the owner wanted to purchase an extended warranty, which the owner chose not to do. As luck would have it, the system blew a gasket about two weeks after the warranty expired. (The writer didn’t state exactly what the nature of the problem was.) Neither Staples nor HP would assist in any repairs since the original warranty had expired and the writer wanted to know what to do.

This brought to mind the nature of the extended warranty beast. I have heard all of the pros and cons about extended warranties. It seems that the only time an extended warranty is a wise choice is when someone gets to collect and get what ever it is repaired.

The cons state that extended warranties are a waste of money since it is usually a money maker for the insurance company who handles the claims. Which makes sense. Especially when it comes to life insurance because none of us wants to make a claim if you are the insured. I guess that wouldn’t be you anyway, but would be your next of kin. :-)

But what has your experience been? Good buy or a waste of money?

In the case of a $400 computer I would be reluctant to purchase an extended warranty since the policy might cost just as much as a new system. Just my 2 cents.

Comments welcome.

  • G

    The simple answer is that it depends on the situation. For a person who is somewhat technically inclined (and willing to take the time for repairs), it is generally a bad deal. The cost of the extended warranty (typically at least $200 for a couple years) would require quite a bit of problems to pay for itself.

    On the other hand, for those who are afraid to use a tool on their computer or those who just don’t want to take the time to do it themselves, the extended warranty can be a nice “peace of mind” purchase.

    The company that underwrites the warranty WILL make a profit (that’s what they hire all those actuaries for). But you could say the same thing about ANY insurance. How many of us would refuse medical insurance (or car insurance) just because the carrier makes loads of money on the policies?

  • Charles S. Harris

    Instead of paying for an extended warranty, use a credit card that doubles the length of the original warranty, for free. I’ve collected three times on such a double-long warranty–once got a whole new laptop.

  • http://wp3.lockergnome.com/nexus/blade/ Ron Schenone

    Hello G.,
    Good points. It really does depend on the situation. I bought an extended warrant for $199 for a Plasma TV. If the TV breaks within four years, I hopefully will be covered.

    Hi Charles S. Harris,
    Excellent advice. :-)

  • HarryH

    For my DLP, I got an extended warranty. I have had a repair after 3 years, and the warranty will replace an expensive lamp. I believe I’ve gotten value for money.

    My refrigerator (Whirlpool, if I must), I also got an extended warranty. Super good idea given that I have gone through so many ice-maker changes, I am numbed. I have extended the extended warranty, now in the 8th year. I suppose I was brought up to believe that refrigerators rarely need service and last 20 years. Not so. Maybe the parts are not so well made, but the warranty has proved it’s worth.

    On computers and other such consumers electronics, I never get the warranty. Most electronics either fail early or never fail (in their service lifetime) in my experience. I don’t expect extended life of consumer stuff even ‘tho the stuff generally is still working when I dump it. CD players seem to be the most fragile, even if I know how to clean them. After awhile they seem to skip, etc., leading me to get another – too much dust around, I suppose.

    So far, the extended warranties I _have_ purchased have been worth the cost…

  • http://www.studioj.net.au James

    Make sure to check the length of the manufacturer warranty. I once bought an LG LCD monitor, and paid $40 extra for an extended warranty (totalling 3 years), and later found out that the manufacturer warranty was 3 years anyway.

  • Michaek

    I love it when I go to OfficeMax or Office Depot and buy memory. The cashier wants to sell me an extended warranty. I always ask them, “Does your warranty start after the manufacturer’s lifetime warranty or before it?” Not one has been able to tell me when their extended warranty starts!

    I also ask why would I want to buy an extended warranty on something that already has a lifetime warranty. I get a blank look as thought they don’t understand!

    I have been working on computers for over 20 years and can only think of only once when a memory module went bad.

    So many things are so low cost that it cost more to repair than to throw away and buy a new one. Buy cheap and you get something cheap.