Are Warranties a Waste of Money?
Nov. 13, 2006 — -- This holiday season, consumers will spend about $1.6 billion on extended warranties.
Americans shell out as much as $400 per appliance to cover purchases like flat-screen TVs, washing machines and refrigerators.
But are pricey warranties worth it for consumers?
Tod Marks, senior editor of Consumer Reports magazine, says no. Consumer Reports recently surveyed extended warranties and found that they weren't worth the cost.
"What these are, are very expensive insurance for products and repairs that you can usually cover out of pocket. It's not health or auto insurance, which covers you for catastrophic loss that you couldn't cover out of pocket," Marks said.
Marks explained that buying an extended warranty was like making a series of risky bets.
"You're betting it's going to break at exactly the time period between when the manufacturer's warranty expires. … You're also betting that the cost of the repair will be more than the cost of the warranty." he said. "You're also betting that you'll want to get it fixed. Technology advances so quickly that new features, dropping prices, better products may mean it's preferable to buy a new item rather than fix the old one."
There are a couple of cases where the extended warranty makes sense.
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