Extended Warranties: 4 Essential Questions to Ask Before You Commit

As many guys will tell you, after countless cookouts and parties we tend to get attached to our barbecue grills the same way we get attached to our dogs.

Let’s face it, a good barbecue grill, like a good dog, is something to be revered, and as such it’s always tough for their owners to recognize exactly when it’s time to finally say goodbye. It’s a reality that I had to deal with for my last outdoor grill.

The Honeybee and I were cleaning up the backyard in preparation for the coming barbecue season when she gently pulled me aside, and pointed to my greased-over rust-eaten grill sitting nearby.

“Don’t you think it’s time?” she asked.

I decided to play dumb. “Time for what?”

“The barbecue. I know you love it — but its best days are long gone.”

“What are you talking about, Honeybee? That grill has at least one good summer left in it. Maybe even two!”

Of course, I eventually came to my senses — but having to take my faithful old barbecue on that long tearful walk to the curb still left me somewhat, well … traumatized.

Even so, after a brief mourning period, I eventually mustered up the fortitude to leave the house and buy a new grill.

At the checkout counter, the cashier asked me if I would like a two-year extended warranty for my $399 grill for $65 more. I thanked her for the offer, but I politely declined.

I know what you’re thinking. It used to be that extended warranties were basically limited to big ticket items like cars and kitchen appliances. Now it seems as if they’re available for almost everything we buy. That’s because extended warranties are big money-makers, with profit margins as high as 50%.

Here are four basic questions you should ask yourself to determine if an extended warranty makes sense for you:

1. How expensive is the product?

If your clock radio craps out, you’ll most likely just throw it away and get a new one. You can’t say the same for an automobile — at least not a newer one. Generally speaking, the more expensive the product, the bigger the potential repair or replacement costs.

2. How reliable is the product?

If a product is going to fail, it’s usually going to do so within the manufacturer’s initial warranty period. Products that survive that initial period tend to last a long time. The key is in knowing if the product you’re buying is highly reliable — if it is, then it makes little sense to gamble on an extended warranty. Current three- to four-year failure rates vary depending on the product, but they can vary anywhere from 37% for side-by-side refrigerators, to 15% for clothes dryers and iPods, and 3% for flat panel television sets.

3. Who’s using the product?

Product reliability numbers assume operation under normal conditions — but even highly reliable products will break when subjected to users who don’t handle them properly. When my son, Matthew, was younger, he was extremely hard on his electronic games and music players, so we always bought the extended warranties. Sure enough, we made claims (sometimes multiple times) on almost every electronic device he ever owned.

4. How much is the warranty?

The more expensive the warranty, the more sense it makes to simply take your chances. Generally speaking, you should avoid an extended warranty if it’s more than 20% of the product purchase price, including taxes.

Finally, before buying any extended warranty, always make sure you do the following:

  • Check your credit card. Believe it or not, many platinum and gold credit cards offer extended warranties for free.
  • Shop around for the best price. That’s because the cost of extended warranties can vary between retailers for the exact same products.
  • Determine if the warranty includes shipping charges. Many warranties don’t cover shipping charges if the product needs be sent in for service. This can get expensive for large items like televisions and computers.
  • Beware the fine print. For example, a two-year policy may give you only one year of additional coverage because extended warranties often take effect the day you purchase a product.

The conventional wisdom out there is that it’s rarely advantageous to consider an extended warranty unless it’s for an automobile. But as you can see, the decision isn’t always so black and white; sometimes extended warranties do make sense.

The trick is knowing exactly when it’s advantageous to pull the trigger.

Photo Credit: Jeremy Keith

13 comments to Extended Warranties: 4 Essential Questions to Ask Before You Commit

  • Wow. You really made some good points. “Who is using the product?” This is a big factor because some people are not as careful as others. Thanks for all the tips…very informative and useful.

  • Oscar

    I wasn’t aware that extended warranties will cover unintended or unusual wear and tear (i.e. your son destroying it). I have never, ever bought one just because I assumed such claims would be rejected and my warranty would be worthless. I may need to look into it next time.

  • I have ended up paying for warranties on things that I really didn’t need to due to the mentality of “just in case”. Sometimes it isn’t worth it and other times it makes sense as you illustrate in your post, there are many factors to consider.

  • Alan

    I also recommend getting the extended warranties for electronic items that you give to kids under 12. We’ve saved literally a thousand bucks in replacement costs over the years. Kids are rough on that stuff.

  • It’s funny to run into this post. I just purchased an iMac desktop computer that ran me about $2k and the employee that was helping at the register asked me if I wanted to purchase the extended warranty. He said ”just in case the screen brakes” and then I started doing an analysis about who the users were going to be, like you mention, and also where the computer is going to be placed. Only 2 people are going to be using the computer which are the two that paid for it, me and my business partner, so the computer is looked out for and I politely declined the employees offer.

  • Learned

    We have only once purchased extended warranty. We purchased a French Door refrigerator and while it was under factory warranty we had service people here twice. Each visit would have cost over $200. As the warranty was about ready to expire we purchased extended coverage for $55 a year. May never need it but it was worth the peace of mind.

  • The problem I see with extended warranty is that almost all the time it overlaps the manufacturer warranty.

    If something goes wrong with the product during the manufacturer warranty period, the store or auto dealer gets paid by you (and you have already paid for it) and then by the manufacturer.

    It’s a good way of making extra money by the store or dealer.

  • Extended warranties are generally a scam so it is generally a no-brainer.

    When we bought our new TV just before Christmas – a 42″ LG 3D HDTV – from John Lewis store here in the UK, one of the clinchers was that they offered a 5 year warranty inclusive.

    We could have shaved £50 (say 8%) off the price (and had to wait in for delivery) but buying an equivalent warranty would have cost us £200 or more.

  • I’ve come to the conclusion that I can expect two years, maybe three from my grills. So I’ve given up on big ticket grills. I’ve actually settled on the “Dual Fuel” types. Charcoal or wood on one side for the nicer steaks and gas on the other for fast cooking. As far as extended warranties, I usually avoid them like the plague. the one exception was for a $1000 flat screen I bought 3 years ago (still going strong). For $65.00 I added two years for a total of three. I thought that it was worth it so bought it. It was a gamble but at that price it was worth it.

  • I was wondered that when it came to warranties because a lot of the time I would just pay the extra. But this all makes sense.

  • skolvikes

    Great article as usual. My Dad always declined extended warranties saying that he was “self insuring” his purchases with all the money he was saving. I follow this philosophy on 95% of the items I buy. One thing I discovered recently is that for some items you can get an extended warranty from a third party for a fraction of the price of what that store charges, I got a warranty for an ipad from Squaretrade for half of what the store wanted and the term was longer. It was such a good deal compared to the value of the device that I even convinced my Dad to get one for his ipad.

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