Financial Fitness with Alan Akina - Should I get an extended warranty?

5 Dec 2013 · 1 min

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1:20

In this segment of the Financial Fitness program, host SPEAKER A introduces Alan Akina, who advises listeners on whether to purchase extended warranties for big-ticket items such as electronics, appliances, or cars. Alan explains that retailers heavily promote extended warranties because they are highly profitable, often keeping 50% or more of the price, far exceeding the profit from the underlying product. He outlines three key factors to evaluate before buying a warranty: (1) many repairs are already covered by the manufacturer’s standard warranty, (2) most products do not fail during the extended warranty period, and (3) typical repair costs are usually lower than the cost of the warranty. He notes exceptions where a warranty might be justified, such as brands known for frequent repairs and Apple products, which lack robust support without AppleCare. The overall recommendation is that, in most cases, buying an extended warranty results in a net loss for the consumer.

We're all faced with the question every time we make a big-ticket purchase, whether or not to buy that extended warranty. Alan Akina helps us make that decision in today's Financial Fitness.
Good morning, gang. Next time you're tempted to buy an extended warranty on your next computer or refrigerator, or maybe a service contract on a new car, you need to think about this. Chances are you'll lose money. Now, according to Consumer Reports, retailers push hard to sell you extended warranties or service plans because they're cash cows for them. In fact, Stores typically keep 50% or more of what they charge for warranties, much more than they make selling the actual products. Now, here are 3 things to consider before getting that warranty. Number 1, some repairs are covered by the standard manufacturer's warranty that comes with the product. Number 2, products seldomly break within the extended warranty period. And number 3, when electronics and appliances do break, the repairs on average do not cost more than the average extended warranty. Now, as a note, not all extended warranties are bad deals. Repair-prone brands may be a consideration, as well as Apple products that do not get much support unless you buy AppleCare. For Wake Up Today, I'm Alan Akina. See you on Wednesday.
All right, thank you very much, Alan.