Are Extended Warranties Worth It?

Do extended warranties on appliances and cars ever really make sense? It’s a question that pops up every time you’re about to make a big purchase—and the answer isn’t always straightforward. Let’s talk about it in plain terms.

What Is an Extended Warranty?

An extended warranty is a service contract that kicks in after the manufacturer’s warranty expires. You pay extra upfront (or sometimes monthly) for the promise that if something breaks down later, you won’t be stuck with a huge repair bill.

Sounds good, right? Well, sometimes it is. But not always.

The Extra Cost of Appliance Warranties

Most major appliances—like refrigerators, washers, and ovens—come with a one-year manufacturer’s warranty. Extended warranties can stretch that coverage to three or five years. But here’s the catch: many appliances don’t break down during that time. And if they do, the repair cost might not even exceed the price you paid for the warranty. Plus, some credit cards already offer extended protection if you use them to make the purchase. So, before you say yes at the checkout counter, check what coverage you already have.¹

Cars: A More Complicated Decision

Extended warranties for vehicles—often called vehicle service contracts—can be helpful, especially if you plan to keep your car for a long time or if it’s a model known for pricey repairs. But they can also be expensive, sometimes costing thousands of dollars. And not all repairs are covered. Some contracts have lots of fine print and exclusions, and you might still be on the hook for deductibles or denied claims ²

When Does It Make Sense?

If you’re buying a used car with no remaining factory warranty, an extended warranty might give you peace of mind. The same goes for high-end appliances with a history of issues. But if you’re buying a reliable brand, or you’re good about setting aside money for emergencies, you might be better off skipping the warranty and saving that cash. See the extended warranty decision checklist below for more information.

The Bottom Line

Extended warranties can be a safety net—but they’re not always a smart investment. Do your homework, read the fine print, and think about how likely it is you’ll need it. Sometimes, the best warranty is just a solid savings account.

Extended Warranty Decision Checklist

Here are some questions you may want to consider when deciding if you’ll buy an extended warranty.

Is the cost of the warranty more than 15 to 20 percent of the item’s price?
Could you set that money aside instead for future repairs?
Does the warranty cover common issues and parts?
Are there exclusions or deductibles that reduce its value?
How long is the manufacturer’s warranty and does it overlap with the extended warranty?
Will you still own or use the item after the extended coverage begins?
What do reviews and consumer reports say about the reliability of the product?
How expensive are typical repairs?
Would a single repair cost more than the warranty?
Are parts and labor easily available?
Are you buying a high-end or complex item like a luxury car, smart appliance or high-tech electronics?
Could you afford a surprise repair bill without financial stress?
Do you have an emergency fund?
Is the warranty offered by the manufacturer, retailer or a third party and are they reputable and easy to work with?
Is the warranty transferable or refundable?
Will the warranty help you sleep better at night, or will it feel like wasted money if you never use it?