If you buy a product from a reputable company, feel free to skip the retailer’s “extended warranty”—you’re probably already covered by a manufacturer’s warranty, and the potential repairs can cost less than you’d think.
Don’t pay for coverage you don’t need
According to Consumer Reports, retailers keep 50 percent or more of what they charge for these contracts, which is a very high margin—much more than they can make selling the products themselves.
“Extended warranties are generally a bad deal,” says Jack Gillis, executive director of the Consumer Federation of America. “First of all, they are not warranties and one doesn’t get the same legal protection as you do with a warranty. They are service contracts, or better, overpriced insurance plans.”
Then again, if you really want the added protection, that’s fine too—just make sure it’s a good deal that actually provides additional coverage beyond what you already might have.
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A manufacturer’s warranty already covers replacement
Many purchased products already include a manufacturer’s warranty that will repair or replace your item if it’s faulty. The problem with a retailer’s extended warranty is that it often duplicates that same coverage, for the same period of time. Worse yet, extended warranties sometimes only kick in after you’ve tried to find relief through the manufacturer’s warranty first. Read the fine print and make sure the extended warranty actually eclipses the coverage you’ve already paid for (companies like Apple have generous two year warranties, whereas others might only offer 30 or 90 days).
Plus, if you’re product breaks down or doesn’t work, it can’t hurt to ask for a replacement even if you don’t have a warranty of any kind. Providing that you have a receipt, many companies will replace items if the product breaks down in an unreasonably short time.
Coverage might not be needed for cheaper products
Repairs for low-cost items like cheap appliances, as an example, will likely not cost much more than a service plan. According to HomeAdvisor, average appliance repair costs total $171, which wouldn’t be worth it if an extended warranty costs you more than that, as they often do for multi-year plans.
Your credit card may have you covered
If you can, pay for products using your credit card, as many cards automatically extend the manufacturer’s warranty up to a year. In this case, an extended warranty is free.
Buy products from trusted companies
If you buy a product from a reputable company, you’re typically buying a something that will last longer than a cheaper knock-off. Plus, these brands tend to have more generous manufacturer warranties. Look for reviews of the product online, too—if it breaks a lot, you’ll definitely read something about it.
For more on extended warranties, the FTC has provided additional guidance, here.
This post was originally published in 2016 and has been updated Jan. 7, 2021 to include new information.
