EXTENDED WARRANTIES-Friend or Foe?

NEA Today, Sep 2004

When you make a big electronics or appliance purchase, you can expect to be offered an extended warranty. Consider these facts before deciding to pay for the extra protection. Many items, like electric ranges, top-freezer refrigerators, and analog camcorders, have a failure rate of only 8% in the first three years, the maximum term of most extended warranties.

On products that take a lot of beating, like laptops, especially if you carry them with you often, the failure rate is nearly double, so it's easier to decide. One reason stores want you to take an extended warranty is because the profit margin on warranties averages 70%, while the margin on most of the products they cover averages only 10%.