Should you buy a warranty?

Dr. Helen regrets not buying the warranty on all the appliances that broke. She shouldn't. Warranties are fantastically profitable for manufacturers, which means they're a fantastically bad deal for you. There's a little bit of truth to those old jokes about appliances breaking immediately after the warranty fails. Most appliances fail either immediately out of the box (due to small faults in the manufacturing not visible to quality control), or work for quite a while before they start breaking. There's usually an inflection point--an age at which the number of breakdowns starts to rise dramatically. Unsurprisingly, your warranty is almost always timed to expire before that age. The only circumstance under which it would be worth buying a warranty is if you know you are about to be a lot poorer--for example, if you are entering grad school. But even then, you'd possibly do better just saving the price of the warranty. Of course, we all have regret when it turns out that we would have been better off buying the warranty in this one case--but that's because we don't remember all the times when we bought the warranty and it lay unused in a drawer. Making the right decision doesn't guarantee the best outcome. It just makes it more likely.

This article available online at:

http://www.theatlantic.com/business/archive/2008/01/should-you-buy-a-warranty/2565/