Is an extended warranty worth it? Usually not

Is an extended warranty worth it? For most things you buy on a budget, no.

The reason

A warranty plan is a bet. The store bets the item will not break. You bet it will. Stores sell plans because, in general, the store wins that bet more often than you do.

Try this example with round numbers. A $60 gadget has a $15 plan. If the gadget breaks, a new one costs $60. So you are paying $15 to avoid a $60 loss. That only pays off if the chance of a break is more than one in four. For small, simple items, it rarely is.

Also check what you already have. The maker often gives a one year warranty free. Some credit cards add extra cover on purchases. Read your card terms or ask the card company.

The exception

A plan can make sense when three things are true:

1. The item is costly to fix or replace.
2. It has parts that fail with use, like a motor or a screen.
3. The plan covers the thing you fear, such as drops or spills, and you have read what it excludes.

Even then, compare the plan price to the cost of a repair. If the plan is close to half the price of the item, walk away. Put that money into a small repair fund instead.

Do this at the register

• Say no, then take the receipt and a photo of it.
• Look up the free warranty length for the item.
• Check the return window. It is often a better safety net than a paid plan.

For the bigger picture on where extra money helps, read what is worth spending more on. If the item is cheap, our guide on the cheap version, smart buy or trap shows how to judge it before you pay.