Thrifty Spending Issue 95: Did you know…

…that sometimes the extended warranty is not worth it?

The Manufacturer’s Warranty Is Often Sufficient

Just about all products on the market today come with a standard manufacturer’s warranty, which typically covers your purchase for one year. The majority of minor malfunctions occur within this first year, while major problems are more apt to occur much later, beyond the reach of an extended warranty’s term.

Consumer Products Depreciate in Value

Suppose you purchase a Blu-ray DVD player for $100, and acquire a two-year extended warranty for an additional $30. Chances are, within the next couple of years, the price of Blu-ray players will drop significantly. In other words, you’re probably better off keeping the $30 in your pocket and just getting a new one should something happen to yours.

Warranties Are Not Cost-Effective

Another reason not to take the bait on extended warranties is that they are simply too expensive. For instance, I recently purchased a 2009 Toyota Corolla. The salesperson was pushing hard for the extended car warranty, which would offer bumper-to-bumper coverage for the first 12 months, at a cost of $1,800. I seriously doubt that I am going to need $1,800 worth of repairs in the next year for a car that is barely two years old.

Furthermore, as previously stated, the extended warranty often overlaps the manufacturer’s protection. You may purchase a two-year extended warranty, but with the manufacturer’s protection covering the first year, you end up paying a two-year rate for only one additional year of coverage.

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