When should I buy an extended warranty?

An extended warranty can be an extra safeguard for your purchases. Carefully consider whether the extended warranty is a good deal.

Tutorial

The option for an extended warranty is available for many of your purchases. There are times when the extended warranty makes good sense, and times when it probably isn’t a good investment. There are some things you can consider to help make a good decision when it comes time to decide whether to take out an extended warranty.

First, consider the item. If you’re talking about a vehicle or some other major investment purchase, you probably need a warranty of some kind. Typically, these high-dollar purchases have a manufacturer’s warranty that will cover problems for a specific period of time but an extended warranty is often an option. If you’re talking about a weedeater or some other purchase that only represents an investment of a few hundred dollars or less, the manufacturer’s warranty will probably be sufficient. Compare the cost of the warranty to the cost of the item. While there’s no general consensus on the percentage an extended warranty should represent, the general rule of thumb is to follow your instincts. If it seems like a significant amount compared to the cost of the item, the extended warranty is probably not worth it.

An extended warranty may very well be a good investment if you foresee trouble paying for a problem. For example, if you are purchasing a used car and have no idea how you would manage to pay for repairs if they became necessary, making that slightly higher monthly payment to get the extended warranty could be a good investment even if the warranty seems too expensive.

An extended warranty (and the warranty itself) should provide you with peace of mind in the event of a problem with your purchase. If your extended warranty has an extensive list of costs that are not covered, you should carefully consider the cost of the warranty and the costs to repair those things that are covered. If the warranty is only going to cover smaller items, you’re probably not going to get your money’s worth.

Naturally, if you anticipate trouble you should purchase the extended warranty. But for most people, the fact that they expect problems would be enough to dissuade them from making the purchase at all.

Of course, the only way you’re really going to know whether an extended warranty was a good investment or not is with the passage of time. If the time for the normal warranty has expired and you have trouble, you’re going to wish you had an extended warranty. If you’ve gone well past the expiration of the extended warranty without using it, you’re going to know that it wasn’t necessary!