Why Extended Warranties Are Usually Bad Deals
- Products rarely fail during the warranty period: Manufacturers design products to last beyond the warranty. Most failures happen early (covered by manufacturer warranty) or late (after extended warranty expires)
- The math doesn't favor you: If warranties weren't profitable, retailers wouldn't push them so hard. The premiums collected far exceed claims paid out
- Your credit card may already cover it: Many credit cards offer extended warranty protection for free on purchases made with the card
- Replacement cost is often low: By the time the extended warranty period ends, you might want a newer model anyway, and prices often drop
When Extended Warranties Might Make Sense
Laptops and Phones (Maybe)
These are expensive to repair and see heavy daily use. AppleCare+ for iPhones includes accidental damage coverage, making it more valuable than typical warranties. For laptops over $1,000 that you depend on for work, consider it.
Large Appliances (Sometimes)
Refrigerators, washers, and dryers have expensive repairs ($200-500+). If you can't afford to replace a broken appliance, a warranty provides peace of mind. But check first—many failures happen within the manufacturer's warranty period.
Refurbished Electronics
Refurbished products have higher failure rates than new ones. If buying refurbished, the warranty makes more sense because the product is at higher risk.
Better Alternatives
- Self-insure: Put the warranty money into savings. Over time, you'll come out ahead
- Use credit card protection: Many cards double manufacturer warranties at no cost
- Buy reliable brands: Research reliability ratings instead of paying for warranties on cheap products
- Check your homeowners/renters insurance: Some policies cover electronics
Take every extended warranty offer you decline and put that money in a dedicated savings account. Over years of purchases, you'll have a fund that covers the occasional repair, and you'll almost certainly come out ahead financially.
The Bottom Line
Skip extended warranties on most purchases. The exceptions are expensive items you can't afford to replace, products with known reliability issues, and items with expensive repair costs (like smartphones with AppleCare+). For everything else, self-insure and save your money.