The Hidden Value of Extended Warranties
We generally do not recommend purchasing an extended warranty because most products will not require repair before the extended warranty expires. But extended warranties can offer real value and additional features that could cost you.
Harvard Business Review explains several benefits of extended warranties for “peace of mind”:
First, they allow consumers to avoid the worry and financial loss of unexpectedly high repair bills. Second, if a product breaks down, consumers don’t have to waste time looking for a company to repair. It’s also nice to know that if a product cannot be repaired, it will be replaced. Finally, extended warranties reduce the likelihood of being ruined from repairs because service companies have an incentive to effectively fix the problem. Bottom line: There is value in sleeping at night.
While you can create your own extended warranty fund (set aside the money you’d pay for a warranty), chances are that this amount won’t be enough for a full replacement if it’s an expensive product. (For example, AppleCare’s three-year MacBook plan costs $ 249. If your MacBook or part of your MacBook isn’t repairable, Apple will replace it, which you can’t do yourself for just $ 249.) And while many credit cards extend your warranty for free , it does. not a guarantee. It’s fine print and hassle through the credit card company to get a repair, replacement, or refund.
In addition, Harvard Business Review adds that certain extended warranties have additional benefits such as overnight repair or on-site replacement. This can be invaluable if your job depends on what you are replacing. (And that’s one of the reasons I prefer business laptops over consumer laptops: better warranties.)
All that said, on a purely financial basis, extended warranties are like any other insurance product: they benefit the issuer more than the consumer, and can seem like a waste of money if you never use them. And, as with other insurance products, it all depends on your risk tolerance and whether you are willing to pay more for peace of mind and convenience. There is no right or wrong answer.
Consumer Extended Warranties Messages Are Incorrect | Harvard Business Review