Extended Warranties: Don’t Let the Exceptions Rule

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Depending on who you talk to, extended warranties are a great way to protect big investments – or a great way for businesses to pad their profits. Here's the best advice on a range of products.

Back in April, Money Talks News deals diva Karla Bowsher wrote about the amazing benefits of extended warranties – with a wink and a nod. In Extended Warranties: Worth the Cost?, she detailed a new study that praised extended warranties as “a testament to their value.”

Of course, that study was conducted by something called the Service Contract Industry Council (SCIC). As Karla wrote…

While the SCIC helps consumers by lobbying for better regulation of extended warranties (the “service contract industry”), their members are companies that sell extended warranties – so SCIC is not going to sell them out.

So now a more objective source has weighed in. The nonprofit Consumer Reports delved into the debate in its August issue. As part of a larger investigation called Repair or Replace It?, the magazine declared, “Extended warranties don’t deliver.”

Appliances usually don’t break during the extended-warranty period, normally after the standard warranty has expired but within two to three years of purchase. Even when breakdowns do occur in that time, the median cost of repair, $150, isn’t much more than the median price of a warranty, $142. And if the product doesn’t break, you haven’t wasted your money on needless protection.

But every rule has its exception.

“A computer might be an exception, especially if you travel a lot or it’s for your busy teenager,” Consumer Reports says. “Make sure the warranty covers accidental damage and extended tech support. Some credit-card companies extend the manufacturer’s warranty free. American Express, for example, adds a year of protection for computers.”

(For owners of Apple laptop and desktop computers, the rules are slightly different. Many owners do seem to benefit from the extended warranty the company offers, called Apple Care. While most user forums sing its praises, some owners prefer to go without it.)

In an interesting twist, one of the early architects of the SCIC responded to the August issue of Consumer Reports by spinning it toward the need for more extended warranties.

“If you’re someone who has ever had to find a quality repair vendor to come into your home to fix your washing machine, or if you’ve had to track down a manufacturer on the weekend of a big game to help you troubleshoot your big-screen TV, then you understand the value and benefits of a service plan,” said Fred Schaufeld, chairman of NEW, which offers extended warranties.

Consumer Reports’ latest issue backs up what Money Talks News has been saying since 1991: In general, avoid extended warranties. But study the few exceptions. Check out these helpful videos…

Are Extended Warranties Worth It?

Extended Car Warranties: 3 Things to Know

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