Ask LH: Are Extended Warranties Worth It?

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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  • I would never buy a computer without one.

    Even if you don’t plan to own a computer for the lifetime of your warranty, it will hold it’s value better if still covered by manufacturer warranty should you decide to sell it.

    An hours labour for a computer repair tends to be $100-$200, which also tends to be a large fraction of the cost of an extended warranty, and that’s before you even factor in having to buy parts for your computer repair.

    • Great advice, except that rarely does an extended warranty transfer to a third party if you sell the good. So if you’re relying on this to justify your warranty purchasing, you’re likely cheating yourself out of money.

      • btw NWS warranties explicitly DO allow for transfer – simply because we can’t see any good reason not to. It is just a sharp lawyer’s ‘gotcha’ to get out of some service work

    • For laptops I must agree. Desktops… well if you buy the parts yourself you’re going to save a lot of money and most parts have a 2-3 year warranty anyway. 5-7 years for Corsair and Seasonic PSUs, and lifetime in the case of most RAM manufacturers.

      Plus with desktops it’s incredibly easy to diagnose the problem yourself with help from forums such as, and if you do have a hardware problem you only have to RMA that individual component.

      In regards to PC repairs… well, once the PSU in my mother’s PC failed. She took it to a to get repaired and they charged $150 to replace a non branded PSU with another non branded PSU. You’re talking 30min of labour and $15 for the replacement PSU.

  • Most large chain stored offer their own extended warranty, having been stung a couple of times by items ‘breaking’ but not being covered by the 3rd party extended warranty, I will never spend the extra money again. I was told point blank by a warranty service agent that; “we will ONLY cover electrical faults on ANY item”, not a great deal of help for someone who thought they would be covered when the fridge door fell off and crashed to the floor 2 months out of manufacturer warranty. (Luckily after a call to the manufacturer, they quite happily fixed the problem regardless of warranty)

    My advice would be to only purchase an extended warranty when it is being offered by the actual manufacturer of the item you are purchasing. Avoid the large chain stores own offerings.

  • Good points. To be honest I would never buy a Mac without Apple Care (especially a laptop) and would never buy a TV without at least three year’s warranty (so topping it up if only one or two years), there’s too many common instances of them breaking (especially Samsungs, although that goes to your point of avoiding unreliable brands). Major white appliances I agree are in the minority in terms of breaking. 20% is a good marker. $200 for a few years extra piece of mind on a $2k+ TV is worth it.

  • On boxing day, a new rule came into place for all Australian retailers. They are no longer allowed to sell extended warranties/ not allowed to call it extended warranties. I was at Harvey’s on Boxing day and the staff there explained it very well for me.

    Apparently the new rule covers us (the customers) for the expected lifetime of the product. A laptop is about 3 years. In those 3 years, the customer can expect the retailer to repair the product for them and it’s like having manufactures warranty for 3 years.

    They’re now offering product care which is an automatic replacement on the item with a minor/ major fault with the product which also includes normal wear and tear. It’s also transferable between owners. In the 3 years the product care is covered for, you can get up to 100 free photos printed at no extra cost, we get free annual hard check ups so if they find something wrong with our system, we get a free replacement! Not only that, they’ll back up our software for free and gives us a free USB key on which our data they’ve backed up is on. (All written on the product care booklet that’s given with the receipt)

    It’s pretty good. I bought a cheapy laptop for my kid for $699. The product care itself was $119 and I’m covered for all those things mentioned above and pretty much guaranteed a new laptop in 3 years time!

    • Glad you’re happy with the deal you got (it’s a good example of offering more than just a warranty), but I think the HN staffer led you astray — I’m not aware of any legal change meaning “extended warranty” has been banned as a phrase in Australia. I think they’ve given you a confused version of the changes that happened a year ago with the Australian consumer law.

      • Could you explain that Angus? I bought a Panasonic Microwave from Gerry Harvey’s Wife Joice, six months ago and having been stung awhile ago with dodgy inverted m’wave’s, I decided to get the extra two years extension, something I never do. Have I been shafted? Mind you I have to take the new one back because it had a heart attack last week end, but that’s within the first year!

        • i bought a samsung TV at HN on boxing day and was VERY impressed with their customer service (something that has been lacking in the past) but wasn’t offered an extended warranty, which i didn’t realise until i read this article!

          if anyone has any questions about the ACL i suggest they read the actual website, and not rely on gawker/lifehacker for legal advice:

          regardless, i’ve often bought extended warranties, and have had to claim on them more than once. i figure one claim, and all of a sudden it’s paid for the last 5 warranties i’ve bought!! (which when you consider the table above, it averages out to about 1 in 5 failure rate across all those items)

          also, i’ve bought a LOT of tvs in my life, and so far i’ve been really impressed with the 27″ samsung’s ease of setup and feature-set, however the sound is TERRIBLE 🙁

        • There has been a revision on that change a year ago. That has just come into effect on boxing day. Like I’ve mentioned, there is no longer a standard one year manufacturers warranty.

          The manufacturer is expected by law now to repair any product for the reasonable life time of that particular product. Harvey’s has counteracted that by skipping the process of repair and offering a full replacement of the product along side with free cloud storage of photos, up to 100 prints per year for 3 years and any other product they offer with their product care that I’ve missed.

          Anyway, just look into it or just go into a store and get a manager to explain it to you. I went back today and asked again as you got myself doubting them but they showed me all the paper work about the change in the Australian consumer law and I didn’t pick up anything suspicious.

          • PS and “offering a full replacement”. in many cases they are obligated to do so , eg for a major fault, under the ACL so is not any extra protection.

    • sorry this mainly rubbish (by the staff at Harvey Norman – why should we be surprised? 🙂 please see separate note below that covers much of this. btw, to be exact, the new ACL came into force on 1/1/13, and it did NOT ban or do ANYTHING re 3rd Party (‘Extended’) warranties that really wasn’t already in place with previous fair trading etc

      the point then and now is that Resellers, such as HN, etc, can not (ie should not) tell customers that they have no warranty/consumer protection unless they purchase an ‘extended warranty’. On the flip side, any ‘extended warranty’ must offer benefits above and beyond what customers are entitled to under the new ACL, which as described below, NWS most definitely does (we even sent our Terms & Conditions to the ACCC).

      and it (the Consumer Guarantee) is NOT, repeat NOT, for the expected life of the product! to put simply, the Consumer Guarantee period – for a particular product, at a particular price point, and for particular usage – is “How long would a reasonable person expect the product to last without a fault?” something very different.

      and actually ‘major faults‘ under the ACL are – unfit for purpose, unacceptable quality, doesn’t match description or sample (and a couple to do with title) – and these, as you can see by their description, are always covered without any additional warranty or ‘product care’, and, for the obvious reasons, never covered by 3rd Party or extended warranties.

      BTW if anyone want one of the extensive articles I wrote about the ACL, please let me know at [email protected]. it was written for Resellers but would still be of significant relevance to retail customers.

  • I hate extended warranties, but I have had good luck. I got one with my Nikon D40x, which died after just over two years. Used it to get $800 store credit on a replacement (probably worth $200 at that stage). Similarly, I was annoyed for years that I got talked into the extended warranty for my washing machine, right up until the point it died and needed a new pump and seals. Add in a few other items an I am well ahead, but I still get a feeling I am getting conned every time I hear the pitch.

  • Fact of the matter is, a 12 month warranty on a TV is bullshit….
    Who buys a TV thinking it will only be free of problems for 12 months?
    Before i bought a new LCD tv about 2 years ago, my no name CRT 32′ tv had lasted close to 12 years with NO problems, only replaced it because i wanted to catch up in technology.
    Dropping 2k+ on a tv then being told it may only work for 12 months is robbery, pure and simple.
    Manufacturers are building these things to fail so we have to upgrade….

    • Here here!
      The factor that most people are missing here is that extended warranties are typically a massive percentage of the value of the item.
      Extended warranty on a $800 TV is $130 (in my recent experience), ie 16% of the value of the TV..
      By the time the Extended warranty comes into play, ie when the TV is out of the Manufacturers Warranty period (lets ignore the statutory warranty), the TV is probably worth $500 – probably more like $400 – so all of a sudden your insurance is an extra 25% – or more – on top of the value of the item..
      It’s gravy for the retailer and I bet the sales rep gets a healthy commission too.

  • I have the ANZ warranty Credit Card which I just
    found out is backed by Zurich Insurance
    Doubles warranties up to 1 year extra.

    Laptop went “poof” after 1.5 years last month…
    ACER fixed it for $219 (new motherboard). And Zurich dropped
    the money into my account about a week later after
    I emailed them the details. Easy.

    The credit card costs normal $/year. But MUCH cheaper than
    any extended warranty.

  • Extended warranties are very rarely worthwhile, they’re just a revenue stream for the seller (a bit like car dealers recommending you have paint protection for your new car).

    I’ve bought a helluva lot of tech in the last 30 years (dating from the IBM 5150) and never had an issue. Yes, I agree that gadgets & appliances these days aren’t built to last but they still give you a worthwhile life for the low cost.

    The only thing I’ve purchased with an extended warranty was my TiVo as I figured the hard drive wouldn’t last five years with the heavy use I give it and I got the five years for just $55.

  • Another option that wasn’t mentioned, in regards to accidental damage, is to look at your contents insurance policy. Some policies, though you pay more for them, cover acidental damages.. so if you’re moving the big tv from one room to another and drop it, you are covered.

  • I will ALWAYS buy an extended warranty for my laptop. Most will stick it through the first 12 months without any major issues – but it sometimes seems like the second you click over that period something goes wrong.

    My previous laptop died on me twice within the warranty period and it’s well and truly paid for itself.

  • I think some people are missing the point: unless it offers any accidental cover or extra benefits (as stated in the article), extended warranties aren’t worth it with the new consumer laws in place.

    Manufacturers can tell you their warranty but that doesn’t mean it’s all you have. The statutory rights we have now are great (just not well known). Even in Italy there is a law that electrical goods must have a minimum 2 year warranty (or something along those lines) , which apple recently got into a lot of hot water, and fined, for because they weren’t telling people buying apple care that some of it overlaps with Italy’s policy on warranties.

    I would never buy an extended warranty now unless it covered accidental damage and I was afraid of breaking it.

  • I work retail at an Apple Authorised Reseller, I’ll agree that most people wont use the warranty, but for three main reasons I think it’s a good idea. Over the course of working here I’ve noticed that the vast majority of people with computers THINK there’s something wrong, when there really really isn’t. If these people grab the AppleCare with their machine, every time they freak out and send their machine to service, it’s not gonna cost them a dime, just a little dignity and time. Secondly those parts that are prone to failure (Hard Drives, optical drives etc) are all very expensive to rip out and replace, especially with the labour costs, one screen replacement on a MacBook Pro six months out of warranty is gonna whack you with $700+, AppleCare is $429. Thirdly, as Sam mentioned it increases the resale value, to almost half the price of the AppleCare in the first place. Also, Greg, if you call Apple upon the purchase of a second hand machine that is still within warranty, they can and will transfer it to the new owner.

    In closing, not for everyone, but still worth it in the right case (for the everyman).

  • Be aware all, extended warranties are insurance products. Are any of you accredited to give advice on insurance products? If you’re not, any advice you give beyond stating the facts of the individual policies can be/is illegal…

  • great advice. After buying a replacement laptop several months ago i had the option of extended warranty which i went for on the basis that a few years down the line, forking money for a laptop repair might be difficult (currently a uni student). Dad told me once i got home, that they are a rip off and a scam, which in some cases i would agree they would be a rip off if its unlikely the product would need to be repaired.

    Though i wasn’t too happy to get home to find the laptop was an ex-display with a dead pixel (without being told so), and when i went in to get it replaced, the woman said it would have needed to be sent in if outside the purchase period (thankfully i was and they replaced it on the spot).

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