Attorney General Dustin McDaniel issued a consumer alert Wednesday, encouraging folks to consider each service plan for their value:
McDaniel said consumers should weigh the cost of the extended warranty against the potential need for the warranty in the future. Some repairs may already be covered by a manufacturer’s warranty, which is included in the product purchase price. The manufacturer’s warranty may require the purchaser to return the item to the manufacturer for repairs, but it generally covers all defects for a specific amount of time from the date of purchase.
“Consumers may want to consider extended warranties for expensive electronics or appliances, but I would urge them first to read the terms of the coverage and take time to consider whether it’s a good investment before paying for the added coverage,” McDaniel said. “Sometimes, extended warranties may not be necessary.”
Extended warranties may not be the best investment because, on average, repairs to items cost only a little more than extended warranty coverage itself. According to Consumer Reports, studies show that items seldom break or need repair within the extended-warranty window, which is typically two to three years after purchase. With most electronics, most repairs are made when the manufacturer's warranty is still in effect. Thus, extended warranties are a costly way to protect against something that is not likely to happen. And, when items do break, it may be just as easy or cost-effective to buy a new version of the item that needs to be repaired.
But extended warranties are also big profit makers for many businesses. Consumer Reports also states that stores keep 50 percent or more of what they charge for extended warranties, and that is more than what they can make for actual product sales.
Click here for more information about extended warranties or other consumer-related issues from the Attorney General’s Consumer Protection website.