Consumer Reports: Extended Warranties Are Evil

I've railed against extended warranties for years now, but my data has always been empirical: I've bought them in the past, but I can recall no cases where I actually used the warranty. I stopped buying them years ago for just that reason and have never regretted it. I just pay for repairs as I need them.

But leave it to Consumer Reports to inject some science into the matter. In a November story that I only just now discovered, the magazine reports that extended warranties will almost all be "money down the drain." Here's why:

• Many repairs will be covered by the standard warranty. (In my experience, the most common problems occur before ever unboxing the product; they don't suddenly materialize years later.)
• When products do break down, it's typically after your extended warranty has expired.
• Want to get something repaired? It will cost about the same as buying an extended warranty in the first place.

And new data shows that extended warranties are becoming an even worse investment.

On even trouble-prone rear-projection TVs, the odds that you'll need to repair one in its first few years of use are only 1 in 10. And newer, flat-panel TVs show a repair rate of only 3 percent.

What about laptops? With a 43 percent repair rate within four years, they're the most trouble-prone of all consumer products that Consumer Reports tracks.

The reasons are obvious, considering the physical beating that most laptops take. But extended warranties don't cover accidental damage; you'll have to buy an accidental damage protection plan and an extended warranty to cover drops, to the tune of up to $400 up front.

That's nice if you're a butterfingers, but few people with a four-year-old laptop will want to bother repairing it, as new technology will be much more enticing at that point.

Extended warranties have saved a very few people a whole lot of money from time to time... and everyone has at least one failed device horror story to tell. That's why these warranties are so popular.

But most people will never use them at all. If you're not convinced, ask yourself why the profit margin on extended warranties is a full 50 percent, vs. less than 10 percent for the actual products. Sounds like a scam to me.

LINK: Why you don't need an extended warranty