Posted by Mike Smith :: November 28, 2007 @ 6:41 am

Like any form of insurance, you can probably convince yourself that not buying an extended warranty on an electronics or appliance purchase is a surefire way to ensure that you’ll end up needing it. Whether or not you should buy one is totally up to you, but here are some interesting points to consider from an article on the subject:

• Most electronics and appliances come with 1 year of coverage from the manufacturer

• Most problems that do occur are manufacturing defects that tend to occur early on
o So if you get through the first few months (when the manufacturer’s warranty is still in effect) you’ll probably get through the first few years

• You may already have extended coverage through your credit card

o Many credit cards double a manufacturer’s warranty for items purchased with their card, so check with your card issuer to see if you have such coverage

• Extended coverage typically overlaps normal coverage
o So buying a three-year warranty only gets you two extra years if the manufacturer covers the first year

• Many products tend not to break down during the first few years of service

• Getting warranty service can be a hassle
o Depending on what your time is worth, it may be cheaper to just replace the item. Remember too that while your extended warranty may guarantee repair or replacement, it likely doesn’t specify how quickly service will take place

• Extended warranties are claimed so rarely, their profit margins run as high as 40% to 80%

o That’s probably why salespeople push so hard to try to entice you to buy one

The article does advise considering the extended warranty on certain very expensive items as well as products built on new technologies, which may not have a proven track record of reliability.

Deciding whether or not to buy an extended warranty can be difficult. Keeping the points outlined above in mind should help you to make a more informed decision. If you need to replace the item yourself, get a P2P loan on Lending Club and you’ll benefit from installment payments that are easy to fit into your budget.