Pay More For Peace Of Mind?

October 19th, 2009

Seems like you can buy an extended warranty on anything these days, but is it really worth the investment?

Extended warranties are a big source of profit for both the retailers selling the product, but also for third party warranty dealers that operate outside of the retailers’ awareness.
Car dealers in particular try to sell extended warranties to increase their bottom line because the average car purchase today results in a net loss for the dealer.
In most cases, springing for the extended warranty probably isn’t worth it. But if you’re famous for breaking your cell phone, or the item you’re buying is known to break down a lot, it may save you a lot of repair and replacement money in the end.

34.4% of new car buyers bought extended warranties in the first half of 2009.
65% of Consumer Reports survey respondents reported that they spent more on their car warranties than they recouped in repair savings.
To extend the coverage on a Toyota Highlander to 8 years or 100,000 miles, an extended warranty will cost between $1,325 and $1,600.

“It’s insurance. It depends on the customer’s views about risk.” – Paul Taylor, Chief Economist for the National Automobile Dealers Association