Question from Angela K.: Rick, I have a question about extended warranties.
I bought a new laptop last Saturday and as the cashier was ringing me up she tried her best to talk me into buying a 2 year extended warranty for almost $60.
I paid less than $300 for the laptop and $60 seemed excessive to me, so I declined.
Do you think I made the right decision? I have up to 30 days to change my mind and go back and buy it.
Rick’s answer: Angela, this is only my personal opinion and plenty of folks will disagree, but I think you made exactly the right choice in declining the extended warranty.
Most retailers these days try to avoid the term “Extended Warranty”, preferring instead to use the more customer friendly “Product Protection Plan” or something similar.
The reason? The term “extended warranty” has developed a bad reputation over the years.
And there are several reasons for that bad reputation…
First of all, extended warranties typically offer very little in terms of real protection when weighed against their cost.
Most electronic items come with a 1 year warranty from the manufacturer already, and the protection provided by the extended warranty doesn’t usually even begin until the manufacturer’s warranty has expired.
That’s where they get you: The term of the extended warranty begins on the day you purchase the item, but the protection doesn’t.
If the item breaks during the manufacturer’s warranty period, in most cases you’ll be required to send it back to the manufacturer for repair.
Some stores will handle the task of sending the item back for you if you bought the extended warranty, but that service simply isn’t worth the cost of the warranty since you can easily send it to them yourself.
What’s more, several recent studies indicate that warranty service for electronic items is rarely needed at all during the first year, and I have to agree after working in that business for decades.
With relatively few exceptions, if a product happens to last through the initial warranty period it’ll usually last through the extended warranty period as well.
By now you’ve probably figured out why extended warranties are such bad deals…
Typical 2 year “product protection plans” are really only active for one year, and they’re rarely used during the year in which they’re in force.
As I mentioned above, most electronic items that make it past their warranty period without a breakdown tend to last long after the warranty has expired.
Of course there are exceptions and there has indeed been a time or two when I joked “I wish I had bought the extended warranty!” But those are rare exceptions instead of the rule.
Bottom line: There’s a reason many stores push extended warranties so hard: The money you pay for them is almost pure profit for the retailer since they’re so rarely used!
In my opinion you’d be better off saving the cost of that extended warranty to apply towards the purchase of a new computer (#ad) in 3 or 4 years.
You could also use the cash you saved to help pay for a repair in the unlikely event that your new laptop ends up needing one during the year after the manufacturer’s warranty has expired.
Technology changes so quickly these days that the typical computer will be technologically outdated before it ever needs a visit to the repair shop.
I hope this helps Angela. Good luck!
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