Are Extended Warranties Worth It?

Are extended warranties worth it?
Illustration: Jonathan Carlson
When I buy something, I want it to last. But if it fails prematurely, I want the company I bought it from to replace or fix it. Unfortunately, that's not always the way things work.

Vendors have severely cut the length of standard warranties for numerous products. Dell, for example, used to offer a three-year standard warranty for many products, but has cut some down to one year and a few to just three months. If buyers want the comfort and security of a lengthier warranty, they have to pay extra for it. Furthermore, products have become more complex and so are costlier to fix; also, many devices are now portable and thus are more at risk of failure. These and other factors are feeding a significant growth in sales of extended warranties, for which consumers spent $16 billion last year--up 7 percent over 2004, says Eric Arnum, editor of Warranty Week, a site aimed at warranty management professionals.

But are these plans really worth your money? 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.

"I couldn't be more happy," says Loren Bergstedt of the service he got with Dell's extended warranties. Bergstedt, a retired civil engineer from Esko, Minnesota, always buys extended warranties on his laptops. When his two-and-a-half-year-old Inspiron notebook died, Dell had a technician there the same day; the next morning he had a replacement (a refurbished model). When the backlight on another laptop went out, a Dell tech came and replaced the screen while he waited.

However, 37 percent of survey respondents said they don't buy extended warranties, mainly because they think the plans are a rip-off, though a large portion also believes they're just too pricey. Most of them haven't regretted skipping it--only 23 percent of that group said they wished they had one when gear failed after the standard warranty expired.

Some people think that if a product is going to fail, it will do so soon after purchase, so the likelihood that you'll need coverage beyond the standard term is low. This has some truth for certain products. "There is a spike in front," says Jim Kahler, director of consumer support for HP's North American PC products line. "You pick up any flaws in manufacturing in the first 90 days; it flattens out [soon thereafter], then rises, especially with a mobile product," he adds.

In our October 2005 issue's "20 Things They Don't Want You to Know," we said that extended warranties are rarely a good deal, and we still think that's true for many products. Whether you should buy one depends on the product you're purchasing, who makes it, the store you're buying it from, and a raft of other factors. We examine these factors here and also boil them down to a cheat sheet of the top things you should think about when considering extra coverage (see "10 Extended Warranty Pointers").

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