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Wednesday, October 04, 2006

Don't Buy Into Product Warranties

This article on extended warranties with consumer products, especially electronics, is all the math I need to know to justify always turning down the that pleaful ploy from the nameless Best Buy employee who warns me of all the electric storms and Acts of God that they'll cover against:

Each year, millions of people gladly pay an additional 10 to 50 percent of a product's original price to extend a warranty. These snap purchases help fuel a booming, $15 billion-a-year business and feed a lucrative profit stream for retailers that sell the warranties and companies that underwrite them. Many consumers do so because they say the plans provide them with peace of mind.

The decision to buy an extended warranty, however, defies the recommendations of economists, consumer advocates and product quality experts, who all warn that the plans rarely benefit consumers and are nearly always a waste of money.

"The things make no rational sense," Harvard economist David Cutler said.
-- Unwarranted (via Marginal Revolution)

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