Should you pay for an extended warranty?

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My history of owning stuff is pretty bleak. I’ve lost two passports, broke a PlayStation by stepping on it, and dropped my e-reader in the bathtub more times than I can count. So when I picked up a $600 starter DSLR from a popular Toronto camera chain, one of the first questions I asked was about the warranty. Was it forgiving for idiots like me?

Well, for just an extra $90, I could join the store’s speciality warranty program and get extended coverage for four whole years! The salesperson rattled off a long list of benefits, quoted a bunch of figures, and quickly added the coverage to my total.

But then I took a look at the brochure’s fine print. The store’s program didn’t cover any “at-fault” damage, like if I dropped the camera or got it wet — even though the sales guy had told me I’d get 20 percent off the costs of these kinds of repairs. It also didn’t cover any of the replacement parts they’d need to order if something turned out to be defective. Or the shipping expenses to get those parts. Or labour. “Uh, is this accurate?” I asked the salesperson. “I wouldn’t worry about it, I don’t think that brochure stuff is up to date,” said the guy. “You know, to be honest, no one’s ever read the fine print before.”

Surprisingly, I decided to wait on that extended warranty. When I got home, a quick Google search told me that just five percent of digital cameras end up requiring repairs within three years. So really now, what’s the point of an extended warranty? And how do we know when they’re worth buying?

“Before you go out a buy a big item, you should check its warranty, ask yourself what other coverage options are available, and determine what’s in your best interest” explains Victoria Stacey, Strategic Issues and Media Advisor from the ‎Ontario Ministry of Government and Consumer Services. “And when you get to the store, don’t be afraid to ask a lot of questions. You need to be clear about what you’re signing.”

Here are five things to ask yourself and the warranty rep before you hand over (more of) your hard-earned money:

What’s covered here?

Don’t be afraid to get specific with the salesperson about where, when, and how you’ll be reimbursed should your product have a problem. “Really understand what sort of damages are covered under your plan,” advises Stacey. “There are some things that we have responsibility for, like dropping an iPhone, and they likely won’t be covered.” So try to offer up a couple of common scenarios, and ask about their relevant sections in the policy.

You’ll be amazed at what can be missing from your coverage — even basic parts. One refrigerator warranty that Consumer Reports examined found that icemakers, beverage dispensers, door seals and gaskets, hinges, lighting, and handles all weren’t covered under the policy.

What could void my warranty?

“There are all sorts of clauses that would void a warranty, and they vary by manufacturer or product,” says Stacey. “If a product issue arises from misuse, lack of maintenance, or a modification of some sort, you could lose your coverage.”

Let’s say you’ve purchased the extended warranty on your new (used) car. If you drive the thing 100,000 km a year and never once get the oil changed, the company’s not going to offer much support when you inevitably break down. So read up on what regular maintenance they expect you to do to keep your policy, and maybe think twice about bedazzling your new fitness tracker.

Are there extra costs?

Warranties are a lot like insurance policies (for our lucky readers with actual health benefits). Often you’ll have to pay a deductible just to file the claim that you’re entitled to. And what about replacement parts? Labour expenses for the repair? Or the costs of shipping the item back to the manufacturer? You’ll have try and figure out under which possible circumstances could you conceivably be forced to pay for something.

What’s the likelihood it’ll be worth it?

Dropping $100 for an extended warranty on your tablet doesn’t make much sense if you know you’ll be upgrading to a new one in a couple years. Likewise, if you’re buying something cheap, you’re not likely to end up bothering to repair it. That’s where a good old cost-benefit analysis comes in handy. “If you’re buying something that doesn’t cost much, and the warranty doesn’t cover shipping and handling or replacement parts, you’ll probably want to skip it,” says Stacey.

It’s important to remember that the house usually wins here. Stores and manufacturers will have done the math to figure out how likely your item is to need repairs. Then they’ll settle on a price that’ll benefit them in the long run, not every single one of their customers.

What will I do if I get burned?

Feel like the company isn’t paying for a repair that your contract says is covered? You’ve got legal protections as a consumer. Canada’s Competition Bureau enforces the rules against misleading warranties and guarantees.

For those feeling suspicious after reading all this, you can always DIY your own extended warranty. Put aside $300 when you buy that new sound system. Now you can earn interest on the money until you need it to purchase some repairs. If all goes well and nothing gets damaged, you get to keep everything, instead of just giving it to a store.

Of course, the success of this method totally depends on the item in question, the amount of damage, and how much people are charging for repairs. If the warranty is substantially cheaper than $300, you might want to go for it. Unfortunately, you’ll have to do the math yourself on this one.