The Truth About Extended Warranties

You know the drill. You're ready to plunk down some money on a state-of-the-art PC. You've run through a gauntlet of decisions, and just when you think you're done, here comes one more: "Do you want to buy an extended warranty to protect that purchase?" Sure you want to protect your purchase. And the pitch is appealing. "No matter what goes wrong, we'll fix it." Should you bite?

In the past, I've always said no. Experts say that if anything goes wrong with a computer, it's likely to do so right away--long before an extended warranty kicks in. And many PCs come with a three-year warranty that offers protection for most of their useful life.

But my real reason is skeptic's disbelief: Anything that sounds so comforting at the scary moment when I'm about to spend $2500 can't be a good idea. And some hungry salespeople oversell extended warranties and gloss over less expensive alternatives. A salesperson for a major national chain told me that his store's management "wants us to push the extended warranties. They tell us that's where they make most of their money. A lot of times your performance selling them reflects how many hours you get [to work]. So there is a lot of pressure."

At press time, the Florida attorney general's office was investigating the sales tactics Best Buy salespeople have used to sell warranties. The state is checking into allegations that salespeople misrepresented the manufacturers' warranties in order to sell the extended ones.

Not Such a Bad Idea?

So I've been a habitual naysayer when it comes to extended warranties. But after talking to a host of experts, I'm changing my mind, at least slightly. Even Consumer Reports, which once advised its readers to "resist the offer of an extended warranty, which usually amounts to expensive and unnecessary insurance," has softened its stance. "We've refined our point of view over the years," says David Heim, the magazine's managing editor. "For certain kinds of products it makes sense: if it's expensive to buy, might be trouble-prone, and could be expensive to fix. In other words, a laptop."

Should you purchase an extended warranty for your new PC? That depends on the machine you buy, the quality of its standard warranty, and the potential cost of nonwarrantied repairs. Also consider how much you're willing to spend to escape paying for a repair nightmare that might happen--but probably won't.

Start by doing the math. A typical extended warranty sets you back 10 to 15 percent of the cost of the product per year of additional protection, but prices vary from retailer to retailer. Can't decide whether the premium is worth it? Try to get an idea of what you might have to pay for a repair if you choose not to buy the warranty. One source of useful information is our "The Price You Pay" chart accompanying this issue's "PC Repair Undercover" feature, which details costs for the most common PC repair jobs. Keep in mind that many shops charge at least $50 to look at a computer and determine what's wrong with it.

The upshot: The cost of an extended warranty will probably exceed what you'd otherwise pay for a minor repair such as replacing a faulty video card. But if your system suffers a rare catastrophic malfunction such as a motherboard failure--or goes into the shop repeatedly for various problems--you may be glad that you extended its warranty.