Buy something at an electronics store and you’ll be confronted by a pushy salesperson who insists you need an extended warranty. You’ll also see extended warranties pushed hard when shopping online. But are they worth it?

There’s a reason stores push extended warranties so hard. They’re almost always pure profit for the store involved. An electronics store may live on razor-thin product margins and make big profits on extended warranties and overpriced HDMI cables.

You’re Already Getting Multiple Warranties

First, back up. The product you’re buying already includes a warranty. In fact, you’re probably getting several different types of warranties.

• Store Return and Exchange: Most electronics stores allow you to return a malfunctioning product within the first 15 or 30 days and they’ll provide you with a new one. The exact period of time will vary from store to store. If you walk out of the store with a defective product and have to swap it for a new one within the first few weeks, this should be easy.
• Manufacturer Warranty: A device’s manufacturer — whether the device is a laptop, a television, or a graphics card — offers their own warranty period. The manufacturer warranty covers you after the store refuses to take the product back and exchange it. The length of this warranty depends on the type of product. For example, a cheap laptop may only offer a one-year manufacturer warranty, while a more expensive laptop may offer a two-year warranty.
• Credit Card Warranty Extension: Many credit cards offer free extended warranties on products you buy with that credit card. Credit card companies will often give you an additional year of warranty. For example, if you buy a laptop with a two year warranty and it fails in the third year, you could then contact your credit card company and they’d cover the cost of fixing or replacing it. Check your credit card’s benefits and fine print for more information.

Why Extended Warranties Are Bad

You’re already getting a fairly long warranty period, especially if you have a credit card that offers you a free extended warranty — these are fairly common. If the product you get is a “lemon” and has a manufacturing error, it will likely fail pretty soon — well within your warranty period.

The extended warranty matters after all your other warranties are exhausted. In the case of a laptop with a two-year warranty that you purchase with a credit card giving you a one-year warranty extension, your extended warranty will kick in three years after you purchase the laptop.

In that many years, your current laptop will likely feel pretty old and laptops that are as good — or better — will likely be pretty cheap. If it’s a television, better television displays will be available at a lower price point. You’ll either want to upgrade to a newer model or you’ll be able to buy a new, just-as-good product for very cheap.

You’ll only have to pay out-of-pocket if your device fails after the normal warranty period — in over two or three years for typical laptops purchased with a decent credit card. Save the money you would have spent on the warranty and put it towards a future upgrade.

How Much Do Extended Warranties Cost?

Let’s look at an example from a typical pushy retail outlet, Best Buy. We went to Best Buy’s website and found a pretty standard $600 Samsung laptop. This laptop comes with a one-year warranty period. If purchased with a fairly common credit card, you can easily get a two-year warranty period on this laptop without spending an additional penny. (Yes, such credit cards are available with no yearly fees.)

During the check-out process, Best Buy tries to sell you a Geek Squad “Accidental Protection Plan.” To get an additional year of Best Buy’s extended warranty, you’d have to pay $324.98 for a “3-Year Accidental Protection Plan”. You’d basically be paying more than half the price of your laptop for an additional year of warranty — remember, the standard warranties would cover you anyway for the first two years.

If this laptop did break sometime between two and three years from now, we wouldn’t be surprised if you could purchase a comparable laptop for about $325 anyway. And, if you don’t need to replace it, you’ve saved that money.

Best Buy would object that this isn’t a standard extended warranty. It’s a supercharged warranty plan that will also provide coverage if you spill something on your laptop or drop it and break it.

You just have to ask yourself a question. What are the odds that you’ll drop your laptop or spill something on it? They’re probably pretty low if you’re a typical human being. Is it worth spending more than half the price of the laptop just in case you’ll make an uncommon mistake? Probably not.

There may be occasional exceptions to this — some Apple users swear by Apple’s AppleCare, for example — but you should generally avoid buying these things. There’s a reason stores are so pushy about extended warranties, and it’s not because they want to help protect you. It’s because they’re making lots of profit from these plans, and they’re making so much profit because they’re not a good deal for customers.

Image Credit: Philip Taylor on Flickr