Are Extended Warranties Worth It?

What's Hot

23 Upgrades Under $50 to Make Your House Look AwesomeAround The House

Trump Worth $10 Billion Less Than If He’d Simply Invested in Index FundsBusiness

Do This or Your iPhone Bill May SkyrocketSave

11 Places in the World Where You Can Afford to Retire in StyleMore

19 Moves That Will Help You Retire Early and in StyleFamily

What You Need to Know for 2017 Obamacare EnrollmentFamily

8 Things Rich People Buy That Make Them Look DumbAround The House

50 Ways to Make a Fast $50 (or Lots More)Grow

32 of the Highest-Paid American SpeakersMake

The 35 Two-Year Colleges That Produce the Highest EarnersCollege

5 DIY Ways to Make Your Car Smell GreatCars

Amazon Prime No Longer Pledges Free 2-Day Shipping on All ItemsMore

More Caffeine Means Less Dementia for WomenFamily

7 Household Hacks That Save You CashAround The House

5 Reasons a Roth IRA Should Be Part of Your Retirement PlanGrow

30 Awesome Things to Do in RetirementCollege

Beware These 10 Retail Sales Tricks That Get You to Spend MoreMore

9 Tips to Ensure You’ll Have Enough to RetireFamily

Depending on your purchase, extended warranties may or may not be worth the extra money.

Would you like a little peace of mind with that gadget? According to Consumer Reports, Americans will spend over a billion dollars this holiday season on extended warranties.

But are extended warranties or service contracts a smart buy? Most consumer experts say they almost never are, for one simple reason: they’re expensive and aren’t often used.

Take digital cameras… According to Consumer Reports, fewer than 10% need repair within the first three years. And the cost of a one-year warranty on a $300 camera can easily add 60 bucks to the cost.

Also reliable are larger appliances. The cost of the warranty will likely outweigh the cost of a repair, and the odds of a repair being needed aren’t that great.

As with most rules, however, there are exceptions. Something portable like a cell phone is much more likely to be lost or broken than a TV. So, is the person you’re buying for accident prone? How long does the factory warranty last? And, of course, how much does the extended warranty cost?

Consumer reports suggests a good rule of thumb is to not pay more than 20% of the value of the item. And don’t leave home without checking out your credit cards… they may already offer some protection.

According to Consumer Reports, the profit on extended warranties approaches 50%, a much higher profit margin than on most merchandise. Maybe that helps explain the hard sell you often get at the checkout.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!


Read Next: 5 Expenses That Vanish During Retirement

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,669 more deals!