In general, Grant says, extended service plans are really bad deals. "You're betting on a very specific set of circumstances," she says.
There are times, however, when investing in that extra coverage can be a good idea. For example, if the item you're purchasing is worth $1,000 or more, you should consider buying the warranty, especially if replacing such a costly item would put you in a financial pinch. "If you had to replace it within the next 2-3 years and pay that cost, if it would be a major financial burden for you, then you might want to take another look," says Grant.
Don't underestimate refurbished models, though. "Take a harder look if the item is a floor model, open box or otherwise refurbished because usually manufacturers will put a less strict warranty on those," says Grant. Adding extra coverage protects your investment longer.
Beware of the latest and greatest tech toys, too. New items tend to have bugs, and this can lead to breakdowns. Also, "they don't have that long test record or reliability," says Grant. "There's no way to tell what problems are going to crop up when." In the same respect, if an item is particularly prone to problems, invest in the extended service plan.
Fragile items are also a good investment. Items like cell phones, digital cameras and laptops can take a beating while you're carrying them around; Grant suggests buying the extended plan, but only if it has accidental damage protection. "Sprint charges $4.00 a month for its protection plans, but that could really save you a lot if you had to replace a Palm Pre, which runs $550.00 to replace if out of contract," says Grant.
For more information on extended warranties, visit www.SmartMoney.com by clicking here.
By Erin Shea