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Tuesday, March 20, 2007
Extended Warranties - a real sucker bet
The Atlanta Journal-Constitution
One of the most frequent questions from readers is about extended warranties. Lord knows they push these things at the store (you won’t be shocked to know that, even in stores where salespeople work on salary, not commission, there’s a spiff for selling the warranty).
My position is that these things are seldom worthwhile. Here’s why I think that. You are essentially placing a bet that the cost of repairs on your gadget will be higher than the cost of the warranty.
It’s a bad bet. My proof? The seller of the extended warranty is making a wager too. The warranty folks are betting that - on average - they’ll pay out less than they make. And believe me, that’s true … otherwise the warranty folks would go out of business.
I’ve also heard from readers who think extended warranties are a good idea. I’ve even received e-mails from folks who won their bet by a large margin. That’s not surprising … the notion here is that some people will profit and some will lose. It’s just that more consumers lose money than make money.
But I also understand why people worry about extended warranties … if you drop several thousand buying an HDTV or notebook computer, you have a right to worry.
I found an article - it seems objective and well-researched - that treats the topic in a much more comprehensive manner than I have. If you’d like some help before placing your own bet - take a look here.
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