Why you don’t need an extended warranty

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Why you don't need an extended warranty

Last reviewed: November 2007

Illustration by Mick Wiggins

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This holiday season, shoppers are expected to spend over a billion dollars on extended warranties for laptops, flat-screen TVs, other electronics, and appliances.

And almost all of it will be money down the drain.

Retailers are pushing hard to get you to buy extended warranties, or service plans, because they're cash cows. Stores keep 50 percent or more of what they charge for warranties. That's much more than they can make selling actual products.

For the consumer, extended warranties are notoriously bad deals because:

Some repairs are covered by the standard manufacturer warranty that comes with the product.
Products seldom break within the extended-warranty window—after the standard warranty has expired but within the typical two to three years of purchase—our data show.
When electronics and appliances do break, the repairs, on average, cost about the same as an extended warranty.

We have long advised against extended warranties. In fact, we feel so strongly that consumers are being misled about them that last year we took out a full-page ad in USA Today (see below) to warn shoppers.

In general, we have found extended warranties to be a bad deal for the customer. The most cautious consumers might want to consider an extended warranty for a repair-prone brand, provided that the warranty is both inexpensive and comprehensive and the cost of repairs tends to be high.

In years past, we’ve said that rear-projection microdisplay TVs might be one of those products for which a warranty is advisable, but even for these products, an extended warranty looks like a poor investment for most consumers, judging by new data. Even though these sets have been three times more likely to need repairs than other types of TVs, our data show that most rear-projection TVs have been trouble-free for their first few years. Most of those that did need repairs were covered by a standard warranty. That suggests there’s less than a 1-in-10 chance you’ll have to pay for a repair on a new projection set. If you do have to pay for a repair, the experience of consumers responding to our survey suggests it won’t cost much more than a warranty would. Respondents who paid for any repairs out of pocket spent about $300 on average.

If you insist, consider an extended warranty on a rear-projection TV if:

You buy a TV from a more repair-prone brand because it is very low-priced.
You’ll use the TV for 5,000 hours (the claimed life of many bulbs) within the time covered by an extended warranty, and the warranty covers bulb replacement.
The warranty costs no more than $200 to $300, the cost of most bulbs.

Consider getting an extended warranty (which includes extended tech support) if you're buying an Apple computer, because they come with a stingy 90 days of phone tech support.

What breaks down

For decades, the Consumer Reports National Research Center has tracked the ownership experiences of millions of consumers and thousands of products. Annual surveys ask Consumer Reports subscribers if they own certain products and whether they've needed repairs. From this data, we learn which brands have been more repair-prone than others, and we have reliability information about the following products that are often bought around the holidays:

Flat-panel TVs

There’s mounting evidence that flat-panel LCD and plasma TVs have been highly reliable products requiring few repairs during their first three years of use. The overall repair rate for the 10 brands covered in our survey was 3 percent, with little difference between LCD and plasma sets. (Brand repair history data is available to ConsumerReports.org subscribers.) Even if your LCD or plasma set does need to be repaired, it will probably cost you less than you're likely to pay for an extended warranty.

Of the small percentage of sets with problems, most repairs were free, presumably because they were covered by the standard manufacturer’s warranty. The few respondents who paid out of pocket for repairs spent an average of $264 on LCD sets and $395 on plasma.

Computers

Most desktop PCs come with a year of tech support. An extended warranty typically costs about the same as the average PC repair. Instead of buying a warranty that you're unlikely to use, you'd be better off paying to fix your computer if it breaks. As noted above, because Apple computers offer only 90 days of tech support (a $49 call otherwise), you might consider an extended warranty if you buy one.

Laptops

Laptops have among the higher repair rates of the products we track. Forty-three percent of three- to four-year-old laptops have needed to be fixed, our subscribers indicate; typical repairs cost between $100 and $400. But many of these problems occurred outside the coverage period of a typical computer extended warranty. Also be aware that extended warranties usually don't cover problems if you drop the laptop or spill something on it. If you're worried about that, you should get accident-damage protection. Typically, though, you must buy an extended warranty first.

As noted above, Apple offers a measly 90 days of phone support for its computers (a $49 call otherwise). Nevertheless, you might consider an Applecare extended warranty if you buy a Mac, both because it extends the length of support to three years and because that support has long been the finest provided by a major computer maker, according to our surveys.

Digital cameras

Our survey of subscribers has shown that fewer than 10 percent of those who bought a digital camera in the past three years have had to get it repaired or had a serious problem. So the odds that you're going to need an extended warranty are pretty low.

Repair rates for 3- to 4-year-old products

Product	Repair rate
Laptop computer	43%
Refrigerator: side-by-side, with icemaker and dispenser	37
Rider mower	32
Lawn tractor	31
Desktop computer	31
Washing machine (front-loading)	29
Self-propelled mower	28
Vacuum cleaner (canister)	23
Washing machine (top-loading)	22
Dishwasher	21
Refrigerator: top- and bottom-freezer, w/ icemaker	20
Gas range	20
Wall oven (electric)	19
Push mower (gas)	18
Cooktop (gas)	17
Microwave oven (over-the-range)	17
Clothes dryer	15
Camcorder (digital)	13
Vacuum cleaner (upright)	13
Refrigerator: top- and bottom-freezer, no icemaker	12
Range (electric)	11
Cooktop (electric)	11
Digital camera	10
TV: 30- to 36-inch picture tube	8
TV: 25- to 27-inch picture tube	6

Source: Consumer Reports National Research Center, 2006 Product Reliability Survey

Stingy manufacturer warranties

The hard sell for extended warranties is coming at the same time that some manufacturers' warranties are getting skimpier, especially for labor, on pricey goods like laptop computers.

Terms have shrunk from 1 year to 90 days in some instances, making repairs potentially expensive even though the parts are free.

Some plans offer in-home service or instant replacements for products as inexpensive as printers, freeing people from having to drop off or ship their broken products to service centers. With TVs, manufacturers typically provide in-home service for larger screen sizes, so check the fine print for a particular company to see whether your set would be covered.

It's important that you investigate the manufacturer's warranty coverage before you buy any product, and patronize those manufacturers that offer decent warranties. More important, buy from manufacturers whose products are reliable in the first place. Brand reliability information for major products we test is available to ConsumerReports.org subscribers.

Overall, products have been reliable enough that we don't think you need an extended warranty.

If you feel you must buy an extended warranty

For consumers who want peace of mind and don't mind paying for an extended warranty they'll probably never need, or for those whose chosen brand is repair prone, we offer this advice:

First check your credit card

Before you say yes to an extended warranty on any product, see whether your credit card provides similar coverage. Such plans, most often found on gold and platinum cards, typically lengthen the original manufacturer's warranty by as much as one year.

Shop around

Extended warranties vary in length and terms. Don't pay more than 20 percent of the purchase price of the product for one. Always try to negotiate a better price.

See what the retailer offers

Some retailers might extend a warranty as well. Costco, for example, extends the manufacturer’s warranty on televisions and computers to 2 years from the date of purchase, at no cost to you.

Beware of hidden "gotchas"

For heavy items such as large TVs or major appliances, ask whether the extended warranty includes in-home repair or pickup. For TVs, who reinstalls it and reconnects it to your audio-video setup? And if the product will be repaired, is there a lemon clause such that after a few repairs the product is replaced?

Keep in mind that an extended warranty usually begins the day you purchase a product, so it overlaps with the standard warranty for a year (assuming that’s the term of the standard coverage). So a three-year policy gives you only two years of additional coverage.