Do Extended Warranties Make Financial Sense?

Extended warranties are commonly offered on many different products that you buy regularly. There are a lot of differing opinions as to whether or not an extended warranty is a good investment. Here are a few things to consider about whether an extended warranty makes financial sense.

Extended Warranty

An extended warranty is a warranty that is offered in addition to the existing warranty on a product. For a certain amount of money, you will be able to purchase additional time that your product will be protected. The warranty might include physical damage, technical support, or repairs to faulty equipment.

Numbers Game

Purchasing an extended warranty is all about playing a numbers game with the manufacturer. Most of the money that goes towards purchasing extended warranties goes straight into profit for the manufacturer. Most of the time, the odds of using your manufacturer warranty are slim. The manufacturer prices the warranty so that it will be slightly less than what you would have to pay for repairs if you do not have a warranty.

Lack of Knowledge

One of the scenarios that would make sense for you to purchase an extended warranty is if you had a lack of knowledge about the product. Many extended warranties provide technical support as part of the purchase of the warranty. If you are purchasing a product that is confusing for you, it may be worth the cost just for the technical support. This way, you will be able to avoid any problems with the product without having to hire someone to help you out.

Avoiding Damage

If you have a tendency to damage things or if you have children that could, it may be to your advantage to purchase the extended warranty. Most extended warranties will cover damage to their products as a result of accidents. Therefore, if you think that there is a chance that your product could be damaged by accident, there is some potential benefit that you could get from an extended warranty.

Frequent Use

You also need to take into consideration how frequently you will be using the product that you are purchasing. If you are purchasing something that you will not use very frequently, it is not likely to experience much wear and tear over the life of the product. However, if you use the product every day, all day long, then it would make sense for you to purchase the extended warranty.


When determining whether a warranty make sense, you should also take into consideration the price of the product. If the price of the warranty is almost as much as the cost of the product itself, then it would not make much sense to purchase the warranty. If the product were to break, you could simply purchase a new unit if you wanted one. If you are dealing with a big-ticket item that has a smaller price for the warranty, then it would probably make sense to go ahead with a warranty purchase.


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