Extended Warranties: Worth the Cost?

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Are you considering buying a new car? What about an LCD TV, mp3 player, or laptop? If so, be sure to read this before you let the cashier talk you into buying that extended warranty too.

The Service Contract Industry Council really wants you to know that your fellow consumers are buying extended warranties.

In a November press release [PDF], SCIC sang the praises of extended warranties on everything from electronics to homes to cars:

In a ringing endorsement for extended warranties (or service contracts), approximately 250 million are sold annually in the U.S., including 11 million alone for laptops and PCs.

Then last month, they issued another release [PDF] in case you forgot:

Sales of motor vehicle service contracts (extended warranties) in the first quarter of 2011 are tracking ahead of sales during the same timeframe last year, a likely result of this quarter’s marked increase in automotive sales, according to the Service Contract Industry Council. … The SCIC believes pent-up demand for autos combined with still somewhat cautious consumer spending is creating a strong market demand and need for motor vehicle service contracts, which offer consumers an affordable means of repairing and maintaining new and used vehicles over the long run.

Don’t they make extended warranties sound like a great way to cut car-care costs? Don’t you feel like you’re missing out now?

The thing is, you might be able to cut more costs without an extended warranty. Like we reported back in 2008, most consumer experts say they’re expensive and aren’t often used.

So why is the SCIC pushing them? As they say in journalism, consider the source. If you read closely, you’ll notice that the facts in their press releases are from their organization, and the glowing quotations that support those facts are from their members. 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.

If you want objective advice on extended warranties, we’ve been cautioning you about them for years. Start with Stacy’s video post about the 3 Things to Know before buying into the hype.

Stacy Johnson

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