It might seem smart to buy an extended warranty if you’re purchasing a big-ticket item, like a laptop, TV, or major appliance. But is it really necessary to accept this extra hit to your checking account? Most often, the answer is no. Here’s why.
The retailer may let you return the item
First and foremost, you might not need a warranty because the retailer you buy the item from could take it back without a hassle. One example of a retailer with an exemplary return policy is warehouse giant Costco. While Costco limits returns on electronics and appliances (purchases that often come with a push to buy an extended warranty) to 90 days after purchase, you can return nearly anything else at any point.
Furniture is another purchase that retailers make big bucks selling warranties for, and Costco has no limits on returns for tables, chairs, couches, and so on. In fact, one Costco member went viral not long ago for returning a couch after more than three years, just because she didn’t like it anymore. Personally, I think this is pushing the limit, but it’s nice to know that some retailers have your back — no extended warranty required.
Your credit card offers purchase protections
One of the best reasons to use credit cards for purchases (especially big-ticket items) is to take advantage of purchase protections. If something goes wrong with an item you bought with that credit card, the card issuer will refund your money.
Credit cards can be a great way to pay for expensive items. If you’re in the market for a new card, check out our list of the best credit cards.
There are restrictions involved, depending on the issuer and the card you’re using (as you might expect, cards with annual fees are more likely to have more robust purchase protections). For example, American Express cards have a coverage maximum between $1,000 and $10,000 per claim, for an annual maximum of $50,000 for issues like damage or theft.
If you’re concerned enough about a given purchase (say, a new laptop) that you’re considering buying a warranty, explore what purchase protections your cards offer and choose the one with the most robust coverage.
The item probably has a manufacturer’s warranty
Big-ticket (or even not-so-big-ticket) buys usually come with a manufacturer’s warranty intended to cover the item for a certain period. Before you spring for the extended warranty, take a gander at the warranty you’re automatically getting.
And even if that warranty is on the shorter side (say, 90 days), you may still be in luck. It’s good customer service for a company to help a buyer, so if something happens to the item after it’s out of warranty, you could contact the company and see what it can do for you.
Extended warranties can be expensive — and may not be comprehensive
Extended warranties themselves come with a few downsides that make them worth skipping. For one thing, they’re often expensive — AARP reported that stores keep 50% to 70% of what they earn on warranties, generating a huge profit margin. Even if the cost of the warranty itself isn’t a lot, you might be on the hook for paying a deductible or paying to ship the item for repair or replacement.
Even the concept of an extended warranty may be flawed. A 2019 study found that people buying an extended warranty believe the product in question is more likely to break than it is. The way to correct for this is to do your research ahead of time. Read product reviews from real people and see what issues you might expect with an appliance, TV, or laptop.
Knowledge is power. If you feel confident the item you’re buying is unlikely to fail, you can pocket the cash you would’ve spent on the warranty. Lean on the right credit card for the purchase (considering using one of the best cash back cards for extra oomph), and investigate the manufacturer’s warranty you get automatically. You may just find that an extended warranty is truly unnecessary.