While shopping for new appliances, exercise equipment, or entertainment technology for your home, you will probably be offered the chance to purchase an extended warranty by a sales associate. They will likely tell you how paying for the warranty now (usually several hundred dollars per appliance) could save you hundreds of dollars or more in repair costs down the road. It might sound like a good idea—after all, the thought of having to shell out an unknown amount of money in the future is scary, and sales associates know it.

So, is an extended warranty worth the money? Is it a sound investment? How risky is it to not purchase the extra coverage?

According to industry experts like Consumer Reports, in almost every case, it’s wisest to decline the addition of an extended warranty to your purchase. A study from Stanford University discovered that consumers overpay for extended warranties because they overestimate the likelihood an item will need a repair, big or small.

The chance your stove or washer will need a repair during the extended warranty period (usually no more than three years after purchase) is low. If a large appliance does break, the cost to repair it is unlikely to be more than what you spent on the warranty.

How do we know this? Because extended warranties are a type of insurance to cover the cost of repair or replacement (under limited situations, of course), which means those offering the extended warranty—the reseller, the manufacturer, or a third-party—have crunched the numbers and know the odds are in their favor that you won’t need to make a claim on the warranty. The prices of these warranties have been carefully calculated through actuarial analysis (probability and statistical methods).

That makes extended warranties excellent moneymakers: it costs almost nothing for a company to offer the service (they’re not creating a physical product that requires initial investment) and they rarely have to provide the service or parts to repair or replace the product.

Still unsure about passing on an extended warranty?

Consider the following before making your decision:

Examine the manufacturer’s warranty. You’re guaranteed by federal law to have access to a manufacturer's warranty before you make a purchase. See how long the existing warranty lasts (usually 90 days to a year), what it covers, and if the manufacturer will repair or replace the item or give you a refund. Some manufacturers will repair a product even after the warranty expiration.

Read all the fine print, don’t take the salesperson’s word. Coverage under the warranty may not be as comprehensive as you think. Common exclusions include accidental damage or any malfunction if you haven’t followed the exact routine maintenance instructions. Or they may require you to use a limited number of service providers, which may require you to drive the appliance to an inconvenient location or pay to ship the item back.

You may have extended coverage through your credit card. Yep, credit card issuers often offer warranty extensions as a perk of using the card. Call the customer service number on the back of your card to find out more.

The warranty provider might go out of businesses. It’s not unheard of, and it would mean you paid extra money for nothing.

Research how much repairs might cost. According to Consumer Reports, extended warranties on large appliances average $126 and on small appliances $21, with the cost for repairs without the warranty averaging just $26 more. And some warranties require you pay a deductible before they begin covering costs (just like insurance!) or charge fees for processing claims.

See if the retailer will take returns on defective items. Shop smart (if you can) at stores with generous return policies that offer many of the perks of an extended warranty.

If you attempt or perform repairs while the product is under warranty, you might void the coverage you paid for.

If you buy an extended warranty on top of the built-in warranty, both warranties start immediately, meaning you’ll pay twice for coverage for the first 90 days to a year.

As prices for goods drop when improved versions are made, an extended warranty could easily cost more than you would pay to replace the product if it fails.

Instead of paying for the extra warranty, consider saving up that money for any needed future repairs—you’ll collect interest on your money and you’ll keep the money if nothing breaks!

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