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Extended Warranties Aren't Worth It

You know the drill: You're ready to pay for a new PC, HDTV, or peripheral, and take it home. But first you must suffer through your intrepid salesperson's 20-minute rap on why you'd be a fool to leave without buying an extended warranty. These plans are rarely a good deal.

Retailers push extended warranties hard because they're almost pure profit. By buying one, you're betting that your product will break, that the extended warranty will cover the damage, and that repairing the product would cost more than you paid for the extended warranty--an unlikely scenario. Extended warranties typically cost between 10 and 30 percent of a product's purchase price, so if these criteria don't hold true for one in every three to ten tech products you buy, routinely purchasing extended warranties will be a losing proposition for you.

Financial planners recommend making your purchase using a credit card that extends the manufacturer's warranty, and then putting the cost of the extended warranty into a repair or replacement fund. Often, by the time you need that money, you'll probably have saved enough to replace the nonworking tech product.

If you still want the extended service plan, read the fine print carefully; don't rely on the salesperson's assurances. Recognize that you're paying more for peace of mind (being prepared for the off chance something does go wrong) than service. And look for service plans that really do help. For example, some plans for rear-projection HDTVs cover the cost of replacing the backlight bulb, which you'll eventually have to do anyway.