Extended Warranties…should you buy them?

Extended Warranties…should you buy them?

Buying an extended warranty is like betting in a casino. The manufacturer or dealer who sells the extended warranty is the casino. The odds favor the house…whoever is selling you the extended warranty.

The manufacturer and dealer know that electronic devices are incredibly reliable and rarely fail outside the warranty period. That’s why they’re willing to sell extended warranties…they know that the price of the warranty is nearly all profit for them because they’ll have to repair a very small percentage of covered devices.

When you buy an extended warranty, you’re betting that your device will need a repair, and that the price for the extended warranty will be less than the price you’d have to pay for the repair.

It’s possible, but unlikely.

Manufacturers and dealers are so confident that extended warranties are just income that 50-60% of the price of the warranty is usually paid to the dealer as commission. In the end, only about half of what you pay for the warranty actually goes toward covering your device!

Hard drives and CD/DVD drives are the most common parts to fail in a computer because they have moving parts that wear out. But drives are inexpensive…and freely available at places like Best Buy, office supply stores, and on Amazon. Drive replacements, even with the cost of labor, are cheaper than the cost of an extended warranty.

Newer devices like the MacBook Air and iPad use all electronic storage that has no moving parts…they’re less likely to fail than traditional computers with hard drives and CD/DVD drives.

You might win your bet if your device required a screen replacement. Replacing a screen costs more than the extended warranty. But it’s much cheaper to skip the extended warranty and handle your device carefully.

Darryl Lewis