SIFE Financial Corner

U-News Staff

Each week, the Students in the Free Enterprise (SIFE) Team from the Henry W. Bloch School of Management, with assistance from a group of respected business people, will answer your financial questions.

John Valasquez, a business major, asked: “Are extended warranties worth it?”

We have all been through it before.

Anyone who has purchased an electronic device or some other expensive item has been offered the chance to buy an extended warranty.

The question still remains, though, are extended warranties worth it?

Well the simplified answer is: it depends, but in most cases, no.

First, you need to realize these extended warranties are HUGE profits for sellers. They can sometimes make more of a profit selling the warranty than they do on the actual gadget or item!

For digital cameras, flat screens, and vacuum cleaners, the chances of needing repair are all under 13 percent.

So you probably don’t need one for those items.

Laptops are a little bit trickier.

They have a 43 percent rate of repair after three or four years, so it might make sense for you to get this one if you carry your laptop around quite a bit.

But keep in mind, most manufacturers offer a standard one-year warranty which is usually sufficient to cover most electronics.

In general, if you can reasonably repair the item on your own, then it makes sense not to get the extended warranty.

Warranties, like insurance, should be used when the repair of an item could be too costly for one person to bear.

Most people can pay for repair on a laptop or camera if needed.

But check the conditions, compare prices and make a solid decision.

Three to four years is a really long time when it comes to technology.

With quickly declining prices, buying new may be the same price as repairing it by then.

Keep this information in mind, make sound financial decisions, and in the long run you should come out ahead!

E-mail your questions to the Student in Free Enterprise Team at [email protected]