If you’ve ever walked into an electronics store and bought the latest piece of tech wizardry, you’ve probably experienced being mobbed by legions of sales associates pushing you to buy an extended warranty “in case something happens.” Regardless of whether your answer is yes or no, it begs the question: What are extended warranties? Are there any benefits to be had?

What are extended warranties?

Extended warranties, also referred to as service agreements, service contracts or maintenance agreements, are prolonged warranties offered to consumers above and beyond any warranties that are included by default with the purchase of a product. These warranties cover for mechanical or electronic failure (usually consumer electronics), and tend to cover the cost of repair, or replacement in the event that the product is deemed too defective for repair.

These types of warranties can be offered and underwritten by retailers, manufacturers or third party warranty administrators – so it’s really important that consumers read and understand the fine print in the terms and conditions of the sale agreement.

Are they any benefits to be had?

Well, it depends.

Extended warranties cost extra, and are usually computed as percentage additional cost of an item’s selling price. According to the CBC, extended warranties in the consumer electronics market can cost up to 20 to 30 percent of a product’s retail price – upping the bottom line on your check-out bill. Take into consideration that sales associates can pocket up to 15 percent commission on a sale of extended warranties at certain stores, and you can tell there’s a direct incentive to market these extended warranties for their own sake.

Extended warranties vary greatly, so it’s important to read the fine print instead of trusting what the sales people tell you. Some warranties may not cover the costs of product accessories, wear and tear, damage by malicious software, normal maintenance (such as software updates) or accidental damages, so the margin for claiming the benefits of an extended warranty can be much slimmer than it seems. Again, the need to read the terms and conditions at the point of sale cannot be underlined enough.

To answer the question, from a monetary point of view, extended warranties aren’t usually worth buying. However, like insurance policies, some may prefer to pay a bit extra for the peace of mind that comes with it. According to most experts, the two things that you may want to consider purchasing extended warranties for are projection TVs (including frontal projectors) and digital cameras, as both products tend to have a higher upkeep than normal products. In these cases, purchasing a good extended warranty may be worth the accompanying peace of mind.

Tips:

• Read the fine prints before purchasing to ensure that it covers what you want and the exclusions are acceptable.
• Ask questions about the performance of the warranty. What it specifically covers is one thing, but how you actually get it fixed is another. Will the store replace the item right there on the spot with a new one? Or will they have to send it back to the manufacturer or even a third party repair shop,  and have you wait weeks before it comes back?
• Consider whether the default warranty that comes free with the product is sufficient. If you need more coverage, only then buy an extended warranty. You can use Wishabi’s sale finder pages to get a feel for the warranty policies of various retailers.
• What is the item’s replacement cost a few years down the road? How does that compare to the cost of the extended warranty? For some tech items, it may be cheaper to buy a new unit in 3 years time than to pay for the full cost of the extended warranty up front.
• The cost of extended warranty offered by retailers is often negotiable, so don’t be afraid to ask for a lower price or concessions.