These days, it seems you can't purchase a home appliance or consumer electronic item without being hounded by some over-eager, fast talking salesperson trying to sell you an extended warranty for your purchase. Does paying more money up front actually save you money in the end?  Are extended warranties saviors or suckers’ bets?

In the past, every time I bought a new laptop or television or home appliance, the voices in my head started up, "What if my purchase breaks the day after the limited warranty expires?" "How will I ever afford repairs on this top-shelf tech item? Replacing a missing "R" key from the keyboard will cost me more than car insurance!" "How will I ever sleep at night knowing I'm on the hook for repairs after the limited warranty expires?" I've always calmed my fears by buying an extended warranty from the retailer or the manufacturer, but I’ve never used one!

Don't repeat my costly mistakes. Instead, make sure you follow these pointers when deciding whether to buy an extended warranty on your next purchase.

Read the Fine Print: Find Out Exactly What the Extended Warranty Covers

The devil is in the details, so read over the extended warranty to find out exactly what it covers. Never rely on what a sales associate tells you is covered in the warranty.  Oftentimes, he or she will say anything just to make the sale or are unclear about what is covered in the extended warranty. Think about whether the types of warranties offered make sense for the product you're buying. For example, an extended warranty that covers accidental damage may be worth it for mobile phones, but not so much for a stationary fixture like a television.  Televisions sets aren't prone to much accidental damage, unless you hold batting practice in your family room or like to rest your 64 ounce Big Gulp of Diet Coke on top of it.

Charge It! Using Your Credit Card May Offer Extra Protection

You can often extend the term of the original manufacturer's base warranty on a product by purchasing the product with one of these major credit cards:

  • American Express: All American Express cardholders are eligible for the Extended Warranty Benefit.  When you charge the entire cost, the Extended Warranty will extend the terms of the original manufacturer’s warranty for a period of time equal to the duration of the original; up to one additional year on warranties of five years or less that are eligible in the U.S.
  • MasterCard: Cardholders with Platinum, World and a couple other types of MasterCard cards are entitled to an Extended Warranty Benefit. This doubles the original manufacturer’s or store brand warranty for up to one year when the item is purchased with an eligible MasterCard card.
  • VISA: VISA Signature cardholders can use VISA's Warranty Manager Service. Once a cardholder registers a product's warranty with VISA, the Warranty Manager Service offers Extended Warranty Protection that doubles the time period of the original manufacturer's warranty up to one additional year on eligible warranties of three years or less.

Some Additional Things to Consider

While there are no absolute rules when it comes to whether you should buy an extended warranty, here are some general guidelines to keep in mind:

  • Don't buy an extended warranty that costs more than 20% of the purchase price of the item.
  • Don't buy an extended warranty that costs more than the average repair cost of the item.
  • Consider an item's record of reliability (how likely an item is to break or fail) when making your decision. Extended warranties make more financial sense for items with higher repair rates. According to Consumer Reports, here are the items most likely to need repairs within three years of purchase:

Product Type – Repair Rate (%)
Desktop PC- 37
Laptop PC- 33
Lawn tractor or riding mower- 29
Refrigerator (side-by-side with ice maker and dispenser- 28
Self-propelled mower- 26
Washing machine- 22
Gas range- 19
Refrigerator (top-and-bottom with ice maker- 17
Projection TV- 16
Push mower- 15
Vacuum cleaner- 13
Dishwasher- 13
Clothes dryer- 13
Microwave (over the range)- 13

This has been a guest post by Lisa from Miami, FL
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