Say No to Extended Warranties

December 10, 2004


We went shopping last Christmas for a digital camera at my favourite “no-sales-commission” retailer. The camera was on sale and when we decided to make the purchase, the sales person started pushing their 3-year extended warranty that would cost us $179 for a $999 camera. The camera came with a 1 year warranty, which can be doubled, if I charged it to my credit card. Though I hesitated a lot before declining the extended-warranty (it was a big purchase, after all), it turned out to be a smart move. I’ve used the camera fairly regularly over the past year, and it still has a year worth of coverage left. More interestingly, a better model (more mega-pixels, more features etc.) is listed at $899 and probably will be on sale for less.

BusinessWeek suggests that extended warranties makes sense only for very few things. They are pushed aggressively by retailers because they make fat profits on them. I think I’ll some money by almost always refusing to buy extended-warranties.