Extended Or Not?

Extended warranties are definitely a good deal for the retailers. A retailer usually keeps at least half of the purchase price of every extended warranty he or she sells. That is why you will rarely get out of a store without being subjected to a strong sales pitch for the extra coverage.

According to David Bach, author of Fight For Your Money, most consumer products are so reliable these days that they rarely break down during the period covered by most extended warranties. According to a 2007 Consumer Reports survey, two out of every three new-car buyers who bought extended warranties said they had spent a lot more on the warranty than they saved in repair costs. And, when it comes to electronics and appliances, for every 100 warranties sold, only 15 people ever file a claim.

So before you spend any money on an extended warranty, consider the following suggestions:

• You have 30 days from the date of purchase to buy an extended warranty. Take the time to think about it and take the contract home.
  

• Read the fine print carefully. It's very important to understand what's covered and what is not, especially when it comes to appliances and flat-screen televisions.

• Check to see if you need to bring to the item to the store or if repair personnel will come to your home. And, make sure that they will hook it back up after it's fixed.

• Ask about the deductible. Many warranties require you to pay the first $25, $50, or $100 of each repair.

• It is very important that you know who stands behind the warranty, especially in these tough economic times. Is it the manufacturer, the retailer, or a third-party warranty company.

• In some cases, extended warranties include such valuable extras as tech support. This can make a protection plan worthwhile for items like computers.