Ask LH: Are Extended Warranties Worth It?


Dear Lifehacker, It seems like every time I go and buy something these days, the salesman asks me three times whether I’d like to buy an extended warranty. I always thought they were a ripoff, but I’ve had a few friends that say they were a godsend when their particular gadget broke down. Which is it? Should I be buying these warranties? Thanks, Worrying About Warranties

Dear Worrying,

This is a pretty hotly-contested topic, and while you’ll hear different things from different people, most of us here at Lifehacker aren’t big on extended warranties. There are, however, a few exceptions, so it’s worth doing a bit of research beforehand to know what you’re up against.

Find Out What the Extended Warranty Covers

Most electronics or appliances you buy come with their own warranty from the manufacturer. For many devices, this is usually around a year, though it can vary from device to device and from manufacturer to manufacturer. This usually only covers malfunctions and defects within that short period of time, to protect you from being stuck with a device that might have just been defective. It won’t cover accidental damage.

It’s worth remembering that under Australian consumer law, you already have warranty rights, and these aren’t supplanted by extended warranties or anything the manufacturer says. If someone sells you a TV and tries to tell you that it’s only covered for 60 days, you’d be in a strong position to argue that it wasn’t reasonable to expect a new TV to break down that quickly. There are no hard-and-fast rules on how long these rights last for; it depends on the price and usage of the goods.

It’s also worth remembering that extended warranties may offer options that you aren’t guaranteed under consumer law, such as loan replacement items while yours is being repaired, coverage for accidental damage, or extended customer support. AppleCare is a good example of this. At the same time, it’s worth restating: companies can’t argue that if you don’t buy an extended warranty, you have no rights at all (something Apple has certainly been guilty of in the past).

How you use the device is also relevant. For stationary devices, like TVs, an extended warranty starts becoming less useful (unless you’re prone to playing football in the living room). Keep in mind, too, that as a rule of thumb you should never pay more than 20% of an item’s price for the warranty — if it’s more expensive than that and you want the extra protection, shop somewhere else.

Check Reliability

The real question here is whether your device is likely to break after the initial warranty expires. Keep in mind that these friends of yours that got saved by warranties are likely in the minority. Most of us with gadgets that work “just fine” don’t go shouting from the rooftops about how nothing has ever gone wrong with every gadget we’ve ever owned, while your friend is likely to tell you the story of his 3-time dead Wi-Fi card. However, things do happen, and some products fail more than others. Information from consumer research organisations such as Choice can be useful here. While it comes from the US, this Consumer Reports data on which products fail in the first three years, courtesy of WSFA in Alabama, can help you assess the likely risk:

  • Desktop PC – 37% repair rate
  • Laptop PC – 33% repair rate
  • Refrigerator (side-by-side with ice maker and dispenser) – 28% repair rate
  • Washing machine – 22% repair rate
  • Gas oven – 19% repair rate
  • Refrigerator (top-and-bottom with ice maker) – 17% repair rate
  • Projection TV – 16% repair rate
  • Vacuum cleaner – 13% repair rate
  • Dishwasher – 13% repair rate
  • Clothes dryer – 13% repair rate
  • Microwave – 13% repair rate

An even better idea is to avoid the brands known to fail more often. When you’re buying a new gadget, do a bit of research not just on its products, but on its reliability and service reputation. Lastly, remember that newer technology is a bit more on the “iffy” side. Many tech companies like Apple have a reputation for buggy first generation products. Similarly, if the TV you want contains revolutionary new technology (like 3D), you might be better off getting an extended warranty since there isn’t yet enough data about failure rates. (Equally, you could just wait until the next generation.) With more reliable products, it’s less likely you’d ever need a warranty (or the hassle of taking it in for repairs) in the first place.

Set Up An Extended Warranty Fund

We’ve talked about this a few times on Lifehacker, but it bears repeating: statistics are in your favour. For all the tech you buy, chances are most of it is going to live out its life just fine, and if you were to buy an extended warranty on every item, you’d waste a lot of money. Instead, set up your own extended warranty fund. Whenever you’re asked to purchase an extended warranty, ask how much it is and save that money away in your own personal warranty fund. If and when something does break, you’ll have money from all the extended warranties you didn’t buy that you can use to repair or replace it. And if it doesn’t break, then you’re a bit richer than you were before.

When you crunch the numbers, extended warranties are more peace piece of mind and profits for those retailers than anything else. If you have a lot of disposable income and you want to feel more at ease, then go for it — but if you shop well (and know your rights), there’s no reason you should ever need to spend that kind of money on something you might not use.

Cheers
Lifehacker

PS Of course, this is just our general opinion, and we’ve had good and bad experiences alike with extended warranties. Feel free to share your thoughts and experiences with us in the comments below.

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