The Extended Warranty Debate

Extended warranties are meant to kick in after the manufacturers warranty expires.

However consumer groups say many products don’t break down within the warranty period and if they do the repair costs are often the same as the warranty.

Consumer Reports took out a full page newspaper ad warning shoppers they don’t need to buy most extended warranties, calling them a big waste.

“Extended warranties are a cash cow for retailers but there are almost always a terrible idea for consumers”, says Kim Kleman with the Consumers Union.

However the Retail Council of Canada says no one is being forced to buy them. “I think most of our members would see that as giving the customer the option of knowing about an additional service that they can then decide whether they’ll buy or not”, says Peter Woodford.

Consumer reports says whether you need extended warranty depends on what you’re buying.

Some products have higher repair rates, so they recommend warranties for items like laptop computers, rear projection TV’s, side-by-side refrigerators with icemakers and front loading washers.

Other items have very low repair rates and don’t need extra warranty including digital cameras, electric ranges and cook tops, any fridge without an icemaker and microwave ovens.

Here are some things to consider before deciding if you should buy an extended warranty.

Check your credit card. Some gold and platinum cards already provide a years free extended warranty coverage.

Shop around. Extended warranties vary in price, lengths and terms, depending on the retailer.

For instance, some warranties will replace the item if it has to be repaired more than 3 times in the term.

You should never pay more than 20 per cent of the cost of the item you are buying. The average should be 10 to 15 per cent.

Ask if the extended warranty includes in-home repair or pickup and reinstallation for things like big screen TV’s and appliances.

If you don’t want an extended warranty, hold on to the amount you would have spent and invest it in your own product replacement fund.