When you buy a new car, phone, microwave, camera, or whatever, the salesperson often offers you the chance to buy an extended warranty. The salesperson gets a commission.
An amazing number of us give in. For example, 40 percent of new-fridge buyers pony up for the extra warranty.
The truth is, though, that an extended warranty is a bet: that your appliance will break outside the original warranty (of say, 90 days or a year) but inside the extended warranty period.
But the statistics show that they almost never do. If a new product fails, it’s almost always soon after purchase, well within the original warranty period. For years, Consumer Reports has been tracking product failure rates. They’ve discovered that extended warranties are a rip-off.
There are a few situations when the extra coverage is more likely to pay off: with used cars, laptops, and cell phones — as long as the policy covers everything, including loss, theft, and dropping.
Remember, though, that your credit card may offer extended-warranty coverage automatically. It’s a common perk for credit cards.
In general, extended warranties are a waste of money.
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