Blogging Star Tribune: Extended Warranty Sales

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Six billion dollars will be spent this year on extended warranties according to this article from the Minneapolis Star Tribune. Experts attribute this to two main factors: one, that customers are becoming familiar with technologies; and two, that the price of the warranty relative to the product is high. Are they worth it? Keep reading after the jump.

Now that prices have plummeted, consumers are much less likely to purchase a $300 extended warranty on an $1,100 TV (the current average price of a flat screen TV) compared to back when prices were often around $3,000. And back when plasmas came out, it was much more mystical, like dealing with the surface of the sun, the 4th matter of the universe.

Target and other discount retailers are also getting in on game, but at a much more reasonable price, with their extended warranties maxing out at just under $80 for anything over $1,000, which, in comparison to the hundreds of dollars being charged elsewhere, could sway customers to purchase at Target.

Sometimes, the price of the warranty doesn't make sense; usually it's 10-25% of the purchase price, but in one example given, it was &79.99, and the DVD player it was for retailed for $84.99. However, retailers counter that it's often worth the possible hassle, such as in the case of large screen TVs, Best Buy will come out to your house to service the item, and if it can't be fixed there, they'll take care of the transporting.

But are they worth it? Consumer Reports says in almost all cases, no, definitely not worth it. For example, digital cameras need repair only 10% of the time an extended warranty is purchased, and this is often outside of the timeframe of even the extended warranty. Even in the case of laptop computers, which have a 43% repair needed rate, the repair can often cost as much as the warranty.

They advise that consumers keep the money in the bank should they need it for a warranty, and if not, use the money for something fun like a date night.

This early 80's throwback pic courtesy of the illustrious untitled 13.

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