Should I buy an extended warranty?

Are Extended Warranties Worth It? The Honest Math

Extended warranties are a huge profit center for retailers—which should tell you something. But there are cases where they make sense.

The Retail Truth

Why stores push warranties so hard:

• Profit margins on warranties: 50-80%
• Most warranties go unused
• Retailers earn more on warranty sales than on products

If warranties were good deals for consumers, they’d be bad deals for retailers. The math rarely favors the buyer.

Extended Warranty Statistics

Industry data shows:

• 80-90% of extended warranties are never used
• When used, repair costs often equal warranty cost
• Net: consumers lose money on average

But averages hide individual variation:

• Some devices fail frequently
• Some people break things often
• Some repairs are catastrophically expensive

The Break-Even Analysis

For a warranty to be worth it: (Probability of needing repair) × (Average repair cost) > Warranty cost

Example: $150 warranty on a $1,000 laptop

• If repair probability is 20%
• And average repair is $400
• Expected value: 0.20 × $400 = $80
• Warranty cost: $150
• Net loss: $70

You’d need 38% failure rate at $400/repair to break even on that warranty.

When Extended Warranties Make Sense

Accidental damage coverage (AppleCare+, etc.): If you:

• Have a history of dropping phones
• Have kids who use devices
• Work in rough environments
• Already cracked a screen or two

For devices with known issues: Some product generations have high failure rates. Research common problems before declining warranty.

For devices you can’t self-insure: If a $1,000 repair would be devastating to your budget, warranty provides valuable insurance. But if you can afford unexpected repairs, you’re often better off saving that warranty money.

When deductibles are low: AppleCare+ screen repair is $29 vs $200-350 out of pocket. Good deal if you’re likely to need it.

When to Skip Extended Warranties

Device is from a reliable manufacturer: Apple, quality ThinkPads, and similar rarely fail within warranty periods.

Standard manufacturer warranty is sufficient: Most failures happen early (covered by manufacturer) or late (after extended warranty expires).

You have credit card protection: Many premium cards extend warranties 1-2 years for free.

You can self-insure: If you buy 10 devices without warranties and save $1,500 in warranty costs, you can afford the one $500 repair you might need.

For cheap devices: A $50 warranty on a $200 device? Replace it if it dies.

For TVs and appliances: Failure rates are very low. Modern TVs and appliances rarely die in years 2-5.

Product-Specific Analysis

Smartphones:

• AppleCare+ with accidental: Worth it if you break phones
• Extended warranty only: Usually not worth it
• Alternative: Good case + screen protector ($30-50)

Laptops:

• Business warranties (ThinkPads, etc.): Often worth it for work
• Consumer extended: Rarely worth it
• Alternative: Keep $150 in savings for potential repairs

TVs:

• Almost never worth it
• Modern TVs rarely fail
• The store wants you to buy this badly—that’s a red flag

Appliances:

• Rarely worth it
• Major failures are uncommon
• Manufacturer warranty + savings > extended warranty

Headphones:

• Not worth it (usually)
• If they break, buy new ones
• Exception: $400+ AirPods Max-type products

The Credit Card Alternative

Many credit cards offer free extended warranty:

• Chase Sapphire: +1 year
• Amex Platinum: +2 years
• Citi cards: +2 years

How it works:

• Extends manufacturer warranty
• No additional cost if you already have the card
• Covers manufacturing defects (not accidental damage)

Check your benefits before buying any extended warranty.

The Self-Insurance Strategy

Instead of buying warranties:

1. Calculate annual warranty spending: $150/year typical
2. Put that money in a “repair fund”: High-yield savings
3. When something breaks: Pay from the fund
4. Most likely outcome: Fund grows, you profit

After 10 years:

• Warranty approach: $1,500 spent, maybe 1-2 repairs covered
• Self-insurance: $1,500+ saved, 1-2 repairs paid ($300-500)
• Net savings: $700-1,200

Making Your Decision

Buy the warranty if:

• It includes accidental damage AND you break things
• Repair costs would genuinely strain your budget
• Device is known for reliability issues
• Deductible is very low ($29-50)

Skip the warranty if:

• It only covers manufacturer defects
• Device is from a reliable brand
• Your credit card provides free extension
• You can afford occasional repairs
• It’s for a TV or major appliance

The Bottom Line

Extended warranties make retailers rich because consumers lose money on them on average.

The exceptions:

• Accidental damage coverage for people who break things
• Known-problematic product generations
• Critical devices for people who can’t self-insure

For everyone else: take the money you’d spend on warranties, put it in savings, and pay for the occasional repair yourself. You’ll come out ahead almost every time.