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Pricey. The more expensive the item, the more thought you ought to put into an extended warranty, says Grossman, of DemystifyingDigital.com. "Weigh it in terms of replacement costs for the item," he says. "How much is it worth spending to protect that asset?"
For help, look to Consumer Reports' online "repair or replace" guidelines (subscription required), which list average costs for both options. Say you're about to pay $2,500 for a Dell XPS M2010 laptop computer. If shelling out an equal amount next year to replace it, or the average $400 it costs for each repair, amounts to a crushing financial blow, spending an extra $200 now for a one-year warranty extension may be the lesser of two evils.
Prone to problems. Read expert and consumer reviews, and you'll discover some gadgets are more likely to require a pricey fix within the extended-warranty period than others.
Rear-projection TVs are a prime example. They are three times more likely to require repairs than other kinds of sets, according to Consumer Reports. The culprit: The $300 bulb that powers the set has an estimated life of just 5,000 hours. Given that the average American watches more than four hours of TV a day, it's likely that the bulb could blow within a three-year extended-warranty period.
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Shopping for a warranty
So you've decided, for one reason or another, that extending your warranty is a good idea. Here's how to get a good deal:Take your time. There's no pressure to buy your extended warranty at the same time as the item itself, says Edgar Dworsky, the editor of Consumer World. Most retailers offer a lag time of 14 to 30 days after your purchase to tack on a warranty. That gives you ample time to make sure it's the right move.
Review the terms. Not all extended warranties are created equal. "Salespeople blur the line, but there's a real difference between an extended warranty and a service plan," points out PC World's Spring.
Usually, an extended warranty is literally an extension of the terms of the manufacturer's warranty. Service plans are broader and may encompass tech support and repairs for accidental damage.
In either case, you'll want to check how claims are handled, where repairs are made, what costs you'll be responsible for (such as shipping) and whether you'll get a loaner while your gadget is being serviced.
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Shop around. Factor your extended warranty into your decision on which retailers to patronize. Prices can range from 5% to 51% of the item's retail cost, according to a price survey last fall by Warranty Week, a trade publication. On a $750 Samsung 26-inch LCD television, for example, Target's warranty amounted to 8% of the purchase price, while Circuit City's was 23%.
Check your credit card. "Why pay for it if you're able to get it for nothing?" Dworsky asks. Most gold- and higher-level credit cards extend warranties on the items you purchase with that card. Check the details on your card before you buy.
This article was reported and written by Kelli B. Grant for SmartMoney.
Published April 22, 2008
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