By April Sorrow
University of Georgia
“More often than not, you should just say no to these expensive add-ons,” said Michael Rupured, a consumer financial expert with UGA Cooperative Extension. “Profit margins are as high as 70 percent for extended warranties compared with about 10 percent for the products they cover. In a down economy, the profit margin on the products is even less.”
Depending on the product, a warranty for three years will cost between $60 and $300. This is an unnecessary cost because most appliances, audio-visual equipment and computers reliably work for years, he said.
Fewer than 10 percent of camcorders, electric ranges, dishwashers and top-freezer refrigerators required any repairs in their first three years, according to an annual survey of Consumer Reports subscribers.
Even among items more likely to need repairs in the first three years, such as a projection television, the average repair costs the same as the extended warranty.
High profit margins for warranties mean aggressive marketing from the retailers, he said. As an incentive to sell more warranties, many retailers offer commissions for employees and at a much higher rate than the product itself.
But, there are exceptions.
“An extended warranty may be worth the money for treadmills that have a standard warranty of less than two years on parts and one year on labor,” he said. “It might also be worthwhile to buy an additional year or two extension of the standard one-year warranty for laptop computers.”
But more often than not, he said, you should just say no to extended warranties. “The money you save will generally be enough to cover the cost of any repairs not covered by the factory warranty.”
(April Sorrow is a news editor with the University of Georgia College of Agricultural and Environmental Sciences.)