I just got back from The Source by Circuit City (aka Radio Shack Canada) and had to share this story. I bought a simple 20′ stereo extension cable for $19.99. I couldn’t believe my ears when the clerk asked me if I wanted to buy an extended warranty for the cable! He said that for something like $2 I could get an extended warranty and that should anything happen to the cable over the next 3 years I could get a replacement. The day they start selling extended warranties for cables is the day that extended warranties are exposed for being the scams that they are. I should have left the store right then but the whole reason I went there is because it is within walking distance from where I lived and I didn’t feel like shopping around, even though $20 was expensive for this cable. One of the reasons I went to The Source is because I don’t like to shop at Future Shop (because I hate their commission sales people and their rebates and extended warranty rackets). It looks like everyone (not just Future Shop) is selling extended warranties these days, to squeeze out every last penny they can. I bought a Palm device for my wife this Christmas at Staples (specifically to avoid Future Shop) and was propositioned with an extended warranty there as well.
I have never bought and extended warranty and never will. It only takes a little bit of common sense to realize that extended warranties are never a good idea. This CBC Marketplace article, “Extended Warranties: Deal or Dud?” examines extended warranties in detail. The final conclusion is pretty unanimous:
As a general rule, extended warranties aren’t considered a good investment. Consumer Reports, the Better Business Bureau, Canadian consumer organizations, and the Federal Trade Commission as well as the chartered accountant we spoke with, all caution consumers against purchasing extended warranties.
The nail in the coffin for me was this data:
Consumer Reports says only 12 – 20 per cent of the money paid for extended warranties is ever used to pay for repairs or claims. The other 80 to 88 per cent of money goes into the profit margin of the third-party/manufacturer.
And some final useful advice,
Our expert, Tod Marks, advises people thinking about an extended warranty to save the money and put it into a repair fund — just in case. “An extended warranty is good for the retailer. It’s not good for the consumer.”