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Question:


Are extended warranties on big-ticket items (TVs, kitchen appliances, vehicles) a rip-off or a responsible purchase?
-ChrisDriver


Answer:


Why can’t they be both? Buying insurance of any sort can be a responsible act, but if the price is significantly higher than the benefit received, it can be a rip-off too. Extended warranties are often such a great source of profit for retailers, especially on items like consumer electronics, that some companies advise or compel their salespeople not to sell certain items unless they sell a service contract with them. If it’s that great a deal for them, it’s probably not such a hot deal for you.
 
But it may be possible to turn the tables a bit and make their windfall work in your favor. If companies are so interested in selling you an extended warranty, they sometimes are willing to cut the price to make the sale. You may be able to get better terms, therefore, if you haggle, but you may want to think twice about it anyway. The discrepancy between what extended warranties cost, even if you can talk down the price, and the potential benefit you’ll derive even if something goes horribly wrong with your car/washing machine/television/computer may not be that great. And it’s always possible that the product will work just fine for many years.
-Conrad de Aenlle



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