ROANOKE, Va. – As you’re shopping this holiday season, you can count on being asked this question at least one: “Do you want the extended warranty?”
It is an option George Ruple, of Hardy, now turns down.
“Most warranties I have gotten in the past it’s like pulling teeth out of these people to try to get them to honor it,” Ruple said.
Dr. Timothy Schauer is an Associate Professor of Marketing at the University of Lynchburg. He said an extended warranty is just that: extended coverage beyond the manufacturer’s standard warranty.
“Really think of them as an insurance policy that safeguards against an unseen or expensive repair for some period of time,” Schauer said.
But that policy for you means big profits for retailers and third-party companies that provide extended warranties. Allied Market Research, a market research firm, estimated the extended warranty market was worth $120.79 billion in 2019.
“Often retailers enjoy a real hefty percentage of the cost of that extended warranty and frankly, sometimes they make more on the warranty than they did on the product itself,” Schauer said.
Is it worth it to buy an extended warranty?
We asked Dr. Schauer if you should “purchase” or “pass” on the extended warranty in three major categories, starting with electronics.
“I would say this: make sure you understand how inconvenient it might be if yours breaks,” Schauer said.
He said while you may have the cash on hand to buy a new television, replacing more expensive items such as a new computer or a smartphone you dropped, may not be as easy. With that in mind, he said it is up to you if you want to “purchase” or “pass” on an extended warranty for electronics.
“In terms of electronics, I think it’s 50-50,” Schauer said. “Kind of know what you feel your risk tolerance is for losing that electronic device.”
Up next, appliances.
“Most extended warranties on appliances extend about one to three years past the manufacturer’s or the product warranty, so often they don’t break down in that one-to-three year period,” Schauer said.
He added manufacturers may be willing to extend the warranty beyond their product warranty if it is within reason, to keep a customer happy. When it comes to an extended warranty for appliances Dr. Schauer said, “Unless you’re planning to move a lot, I probably wouldn’t on an appliance.”
Schauer said the reason those who move often should consider an extended warranty is because every time an appliance is lifted or loaded and unloaded into a truck for a move, it increases the chance for something to break.
But for most consumers, Schauer said you can “pass” on the extended warranty for appliances.
When it comes to deciding on an extended warranty for a car, Schauer said not only should you consider the hardship that could come with replacing or repairing it, but also how much cash you have on hand and how long you plan to keep your car.
When it comes to an extended warranty for a car, Schauer said, “I just think that the cost of car repairs and the uncertainty of how to even fix them, that might lean me into the direction of advising you to get one.”
You may want to “purchase” rather than “pass” on an extended warranty for your car.
Before buying any extended warranty, Dr. Schauer said it is important to first understand what is covered by the manufacturer’s warranty and avoid rushing to make a decision.
“See if you can take a day or two or three and sleep on it and think a little bit more about whether or not you need or desire an extended warranty,” Schauer said.
Some credit cards offer extended warranty options, so also check with your credit card company before buying an extended warranty from a retailer or third-party company.