Digital Home Thoughts: Are Extended Warranties Worth It?

"PC World decided to find out. We surveyed readers to discover how many of them purchased such warranties and how satisfied they were with the service they received. Of our 2031 respondents, 63 percent said they had bought extended warranties; 90 percent of those who used the warranty said their request had been honored with either service or a replacement product. And 80 percent of those who received help said they were satisfied with the outcome."



Overall, I think extended warranties are a rip. They are basically insurance. Insurance makes sense when you can't afford the cost of replacing an item in the event of a failure, like having insurance on your house. Assuming you buy coverage on everything, sometimes it would be a waste because the product would fail and sometimes you would win because it would cost more to repair than you paid for the warranty. But, like Vegas, the house always has the advantage. The cost of an extended warranty is based on the expected average expense per policy plus a profit margin (pretty hefty in most cases). By and large, I think you are best off forgoing the extended warranty and banking the money that it would have cost. Over the long term, you should be able to pay to have any broken items repaired and still come out ahead.