5 Reasons You Don't Need an Extended Warranty

Your purchase likely comes with other protections.

To quote classic American cartoon character Homer J. Simpson, "Extended warranty?! How can I lose?" Well, with an extended warranty purchase, you're most likely to lose money, and also potentially your precious time.

If you're buying a new home appliance or consumer electronic item, such as a computer or a smartphone, you'll likely be offered an extended warranty at an additional cost. Extended warranties are available on many items, but these are the most common situations to be asked to buy one. Not even Amazon shopping keeps you safe from this offer; I am routinely asked about purchasing one in the process of checking out at Amazon (and on a variety of items, most recently on a new power adapter I purchased for an external hard drive). Extended warranties differ from an existing manufacturer warranty (more on those below), by offering to cover your purchase against breakage or other damage for longer. Sounds good, right? Well, not necessarily.

1. Extended warranties are expensive

Warranty Week newsletter noted in 2017 that extended warranties were then a $40 billion per year business. This is a lot of money to spend to protect new manufactured goods, surely most of which will be in good working order for at least the first part of their useful lives (and likely for the period of time the item is covered under the warranty anyway). If you're already springing for a new clothes dryer, do you really want to tack on an extra charge for a service that may not be needed? Plus, the cost to just pay for a repair is likely less than the warranty will end up costing you, according to Consumer Reports.

2. Extended warranty coverage may not be applicable in all situations

Extended warranties don't cover everything that could potentially go wrong with your new purchase, and if you're considering purchasing one, it's a good idea to really dig into that fine print to see what exactly it'll cover. As noted by the Federal Trade Commission, extended warranties might also have specific requirements for maintenance or care of the item, and if it breaks, the company may be able to blame that on you using or maintaining it improperly, and then deny coverage.

3. Your purchase likely comes with a manufacturer's warranty

Most appliances and electronics, small and large, automatically come with at least a limited manufacturer's warranty. It seems as if every toaster or vacuum I buy has warranty information right in the box, or sometimes printed in the back of the user manual. According to Consumer Reports, these warranties usually last about 90 days, and even beyond that period, you still may not be out of luck. It's good customer service to honor a warranty past expiration, and many companies like the boost this move can give their brand (especially in these days of social media, where you can tweet at a manufacturer directly in a public space).

4. Your credit card may protect you

The final reason you don't need an extended warranty is linked to the payment method you used for the purchase. If you used a credit card for it, you may have what amounts to an extra warranty through the card issuer. Credit card protection often outlasts the manufacturer's warranty, so read the fine print for this cardholder benefit, which may cover an item that breaks, is stolen, or has another mishap. The best credit cards out there come with great perks that you may not be aware of, and it pays to use them when you can to save money and a headache.

5. The retailer may take the item back

If all else fails, if it's been a short amount of time since you bought the item and it breaks, you may even be able to get your money back from the retailer that sold it to you. Return policies vary, but a lot of retailers will stand behind the products they sell. Costco is an example of one of these stand-up retailers.

Still thinking about that extended warranty? In addition to the above reasons you likely don't need it, remember that you can save the money you would've spent on it in your emergency fund, in case your new oven or dryer needs a repair. Otherwise, using the right credit card to buy a reputable product from a good retailer can go a long way to ensure you don't need an extended warranty.