Are extended warranties worth your money?

Seven On Your Side
December 2, 2008 5:17:56 AM PST
Consumers spend about sixteen billion dollars a year on extended warranties. But given uncertain times at many retailers, are they a good bet or a loss leader when you buy one at the store? When Liz Zanatta turns her lap top on, a blank black screen is all she sees. She's learned the only way to see anything is to use a flashlight. Even then, she can barely make out an image.

"But it defeats the purpose of a laptop to carry a large flashlight with you," says Liz.

Liz tells 7 On Your Side's Tappy Phillips she bought the laptop for her college age daughter two years ago from CompUSA. She also paid them two hundred dollars for an extended warranty.

"You could drop it, you could throw it out a window, and they'll still fix it. We thought," says Liz.

But Liz thought wrong. She says, ever since CompUSA closed their New York area stores, the warranty company hasn't helped her.

"I have the original sales receipt. I read everything to them and they tell me that laptop was never purchased," says Liz.

Now Liz is racing the clock, her warranty expires in three months. "They think I'll go away. But I'm not. I refuse to go away at this point," says a defiant Liz.

"Almost in all cases it's something you can skip," says Consumer Reports Magazine's Mandy Walker when asked whether consumers should buy extended warranties.

But what if you've already bought one and are worried about the solvency of the retailer? "First thing you want to do is see who sold you the warranty," says Consumer Reports Mandy Walker. "Maybe you bought it at the store. But if it was sold through the manufacturer or it's through a bank, you may be fine. (That probably means) it's through a third party."

That's what happened to Liz. Soon after CompUSA closed their local stores and reorganized with a new owner, they turned their warranties over to yet another company and some got lost. But once we reached the new warranty company, Liz was promised a check for the full purchase price of the computer - $1500, plus other costs she incurred fighting the issue.

"After 8 months it took, but they did it within a week. So Seven On Your Side did what we needed to do," said a relieved Liz Zanatta.

The warranty company acknowledged they had lost many consumers files since CompUSA changed owners. Our expert's best advice? Instead of researching extended warranties, spend extra time finding out which brand is the most reliable. And check your credit cards, many extend warranties if you use their card for the original purchase.


Story by: Tappy Phillips

Produced by: Steve Livingstone