Extended Warranties: 4 Questions to Ask

Photo (cc) by tannazie

As many guys will tell you, we tend to get attached to our barbecue grills the same way we get attached to our dogs.

Let’s face it, a good barbecue grill, like a good dog, is something to be revered, and as such it’s always tough for their owners to recognize when it’s time to finally say goodbye. It’s a reality that I had to deal with for my last outdoor grill.

The Honeybee and I were cleaning up the backyard in preparation for barbecue season when she pulled me aside and pointed to my greased-over, rust-eaten grill sitting nearby.

“Don’t you think it’s time?” she asked.

I decided to play dumb. “Time for what?”

“The barbecue. I know you love it – but its best days are long gone.”

“What are you talking about, Honeybee? That grill has at least one good summer left in it. Maybe even two!”

Of course, I eventually came to my senses – but having to take my faithful old barbecue on a tearful walk to the curb still left me somewhat, well…traumatized.

Even so, after a brief mourning period, I eventually mustered up the fortitude to leave the house and buy a new grill.

At the checkout counter, the cashier asked me if I would like a two-year extended warranty for my $399 grill for $65 more. I thanked her, but politely declined.

It used to be that extended warranties were basically limited to big-ticket items like cars and kitchen appliances. Now it seems they’re available for almost everything we buy. No mystery: Extended warranties are big money-makers, with profit margins as high as 50 percent.

Here are four basic questions you should ask yourself to determine if an extended warranty makes sense for you:

1. How expensive is the product?

If your clock radio craps out, you’ll most likely just throw it away and get a new one. You can’t say the same for an automobile – at least not a newer one. Generally speaking, the more expensive the product, the bigger the potential repair or replacement costs.

2. How reliable is the product?

If a product is going to fail, it’s usually going to do so within the manufacturer’s initial warranty period. Products that survive that initial period tend to last a long time. The key is in knowing if the product you’re buying is highly reliable – if it is, then it makes little sense to gamble on an extended warranty. Current three- to four-year failure rates vary depending on the product, but range from 37 percent for side-by-side refrigerators, to 15 percent for clothes dryers and iPods, and 3 percent for flat-panel television sets.

3. Who’s using the product?

Product reliability numbers assume operation under normal conditions – but even highly reliable products will break when subjected to users who don’t handle them properly. When my son, Matthew, was younger, he was extremely hard on his electronic games and music players, so we always bought the extended warranties. Sure enough, we made claims (sometimes multiple times) on almost every electronic device he ever owned.

4. How much is the warranty?

The more expensive the warranty, the more sense it makes to simply take your chances. Generally speaking, you should avoid an extended warranty if it’s more than 20 percent of the product purchase price, including taxes.

Finally, before buying any extended warranty, always make sure you do the following:

  • Check your credit card. Believe it or not, many platinum and gold credit cards offer extended warranties free.
  • Shop around for the best price. The cost of extended warranties can vary between retailers for the exact same products.
  • Determine if the warranty includes shipping charges. Many warranties don’t cover shipping charges if the product needs be sent in for service. This can get expensive for large items like televisions and computers.
  • Beware the fine print. For example, a two-year policy may give you only one year of additional coverage because extended warranties often take effect the day you purchase a product.

Conventional wisdom suggests extended warranties aren’t a good buy, unless perhaps for an automobile. But the decision isn’t always so black and white; sometimes extended warranties do make sense.

The trick is knowing exactly when to pull the trigger.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
15 of the Fastest-Growing Jobs Today
15 of the Fastest-Growing Jobs Today

Times are tough, but these career fields are thriving.

Grow Your Savings in 2020 With These 5 Tricks
Grow Your Savings in 2020 With These 5 Tricks

Saving money doesn’t have to be painful. Here are some ways to game yourself into stashing more cash.

7 Big Purchases You Should Never Make
7 Big Purchases You Should Never Make

Sometimes a big-ticket purchase is nothing more than a big waste of money.

15 Amazon Purchases That We Are Loving Right Now
15 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

15 Great Amazon Finds You Can Buy for Less Than $5
15 Great Amazon Finds You Can Buy for Less Than $5

These products offer big value at a small price.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

The 15 Worst States for Retirees in 2020
The 15 Worst States for Retirees in 2020

Based on dozens of metrics tied to affordability, quality of life and health care, these are not ideal places to spend retirement.

11 Household Items That Go Bad — or Become Dangerous
11 Household Items That Go Bad — or Become Dangerous

When you get the impulse to stockpile these everyday items, pay close attention to their expiration dates.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

This Is the Cheapest Place to Buy a Used Car
This Is the Cheapest Place to Buy a Used Car

Looking for a good deal on a set of wheels? This should be your first stop.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

5 Things That Make Life More Meaningful for Retirees
5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

7 Surprising Features That Boost Your Home Value
7 Surprising Features That Boost Your Home Value

You can add value to your home without hiring a contractor to do expensive renovations.

Eat These 4 Foods If You Want to Avoid Hearing Loss
Eat These 4 Foods If You Want to Avoid Hearing Loss

Is your diet helping or hurting your hearing?

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.