Extended warranties: Trade group predicts a drop in sales

A smaller proportion of consumers are expected to buy extended warranties for electronics items in the months to come compared with the recent past.

That's not wishful thinking from Consumer Reports, which has long recommended against these add-on warranties as typically unnecessary and overpriced. It's a prediction from the Consumer Electronics Association, a trade group that represents electronics manufacturers and a number of retailers, too.

In a keynote address to the Retail Vision conference, Tim Herbert, the CEA's senior director for market research, said the association predicts that 16 percent of U.S. households will buy or consider buying an extended warranty when purchasing electronics items in the coming 12 months. That's less than half the 36 percent that bought or considered such warranties for electronics items in the year prior to the study's release.

In an interview with Channel Web, a business website, Herbert is quoted as saying the drop is "a testimony to the durability of electronic devices. For the price, these products last a very long time and in the majority of cases they will operate with little or no problems for their useful life." In general, Consumer Reports' repair histories for major electronics goods support that view, showing failure rates in the first few years of life that are typically quite modest; for example, only about 3 percent of flat-panel TV sets fail within the first three years.

Further, when items do fail, the repairs frequently occur within the term of the manufacturer's standard warranty, and are covered by it. And when they aren't, our surveys show, the average cost of repairs is often no more than an extended warranty might cost; again, with TVs, for example, we've found the average repair bill for the unfortunate few whose TV breaks down runs to about $300, the typical cost for an extended warranty for a flat-panel set.

We're not claiming credit for the predicted drop. We must, however, note that it follows a multi-year campaign on our part against extended warranties, including a full-page ad in USA Today during the 2006 holiday season (shown above) that read:

"Dear Shopper,

Despite what the salesperson says, you don't need an Extended Warranty.

Yours truly,

Consumer Reports."

—Paul Reynolds