Extended Warranty Buying Guide

In our latest survey on electronics buying, 65 percent of in-store shoppers said that sales staff had pitched a service plan to them. In-store electronics shoppers, however, were not much more likely than online shoppers to buy a plan (16 percent vs. 10 percent). In our 2016 survey, we found overall that the median price paid was $78 in stores and $79 online.

Our survey results were similar for those who bought major appliances. Seventy-eight percent said their checkout didn’t conclude without at least a suggestion that they purchase a service plan. At some stores, shoppers felt “strongly urged” to spring for the extra coverage. Twenty percent of major appliance shoppers reported buying the coverage, compared with 3 percent of those who purchased small appliances. The median price paid for a plan was $126 for a major appliance and $21 for a small one. There are many reasons we recommend against buying service plans:

Repairs May Be Covered by Manufacturer’s Warranty
Although manufacturers’ written, or “express,” warranties often don’t last as long as they used to, there’s a good chance that your product is covered for at least 90 days. Buying a service plan may duplicate coverage you already have, and it sends manufacturers a message that limiting their express warranties will increase the sale of service plans. You shouldn’t have to pay extra to get manufacturers or retailers to stand behind their products.

Repairs Aren’t That Costly
According to our 2015 Repair and Replace Appliance Survey, when appliances do break, the repairs, on average, cost not much more than the average cost of a service plan. The median difference in our latest survey was $26.

Manufacturers Sometimes Cover Out-of-Warranty Items
If a product breaks down in an unreasonably short time or if there’s a known problem affecting many customers, manufacturers often will help by replacing the item free or at low cost, or by providing free or discount parts or repairs. So contact the manufacturer and ask for help. If necessary, appeal all the way to the executive office.

Your Credit Card May Have You Covered
Many credit cards automatically extend the manufacturer’s warranty up to a year or so on many products purchased entirely with the card. The coverage is free.

You may have other warranty rights. As a result of state laws, most products automatically come with an unwritten "implied warranty of merchantability," which means the items must function as a person reasonably would expect, be free of substantial defects, and last a reasonable amount of time (although the duration of the implied warranty usually is no more than four years). If a product can’t meet these requirements, you may have a right to pursue the retailer and/or manufacturer legally. An exception is allowed for items that were sold using terms such as “as is,” which is the case for much of what’s being sold online, based on the fine print we’ve read on many retail websites. But 11 states (Connecticut, Kansas, Maine, Maryland, Massachusetts, Minnesota, Mississippi, New Hampshire, Vermont, Washington, and West Virginia) and Washington, D.C., prohibit such exceptions, so you’re covered no matter what. For more information on your warranty rights, read our 2013 report, "What you need to know about warranty laws."

The Plan May Let You Down
Service plans typically have many fine-print exceptions that a provider can use to deny your claim. Among respondents to our 2015 survey whose repairs were covered by extended warranties, 61 percent were highly satisfied and 19 percent were dissatisfied with their repair. These numbers are similar to the percentages for those who paid for repairs out of pocket. Fifty-five percent were highly satisfied, and 21 percent were dissatisfied.Our surveys also found that:

• Seventeen percent of those who had an appliance repaired under an extended warranty said it took an unreasonable amount of time to get it fixed, compared with 9 percent of those who paid for the repair out of pocket.  

• Twenty-three percent of those who had an appliance repaired under an extended warranty complained that it took more than one try to get it fixed right, compared with 15 percent of those who paid for a repair themselves.

Automotive service plans sold by third-party companies instead of by car manufacturers have been a particular problem. There have been many complaints from customers who say the providers often refuse to pay claims, often saying the problem isn’t covered.

You Can’t Afford to Protect Everything
Even if the plans were worth every penny, it’s simply not cost-effective to buy a plan to cover every major purchase in your life. While a service plan may leave you coming out ahead once in a while, overall you’ll probably save money by avoiding plans and seeking other ways of tackling broken or defective products.

Self-Insure
Save the money you’d otherwise spend on service plans. Place it in a savings account, or put it in a designated product repair/replacement fund. Then if a product breaks, you’ll have the money to repair or replace it. Of course, you first should try your other options, such as contacting the manufacturer or retailer if you think the problem was the result of a defect, or using coverage you may have from your credit card.

Buy Reliable Products
The more reliable the product, the less likely it will be that you’ll have to fix or replace it prematurely. Also, check out user reviews on this website and by searching the web for the product name and/or model number and the word "reviews."

Read Manufacturer Warranties Before Buying
Under federal law, a seller is required to show you the warranty before you make a purchase. If you find the warranty inadequate, consider another product or manufacturer.

Examine the Retailer’s Return Policy
Some online retailers say that your only recourse if they sell you a defective product is to deal with the manufacturer. Some others say that you can return a defective item, but only for a limited period or while the standard return policy is in effect. If you run into this, consider shopping elsewhere. A retailer should never disclaim responsibility after taking your money and selling you junk. You’re entitled to get what you paid for.