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man and woman signing an extended warranty in a car dealership

Is an Extended Warranty Ever Worth It? The Truth for 2026

/13 Comments/in , , /by Mary Hunt

You know that moment when someone tries to upsell you on something so small it’s almost insulting? I had one of those recently, and it’s exactly why I’ve never trusted extended warranties. There’s real money behind that pitch. Just not the kind that ends up in your pocket.

man and woman signing an extended warranty in a car dealership

I was in a toy store with one of my grandsons (yes, I’m that grandmother) picking out a little something just because. We landed on a toy shaving kit. Adorable. Perfect for bath time. Under $10.

At checkout, without missing a beat, the clerk asked if I’d like to add an extended warranty. For $4.79. On a $10 toy.

I laughed. Out loud. She winced. I apologized, but honestly? I couldn’t help it.

Here’s the thing about extended warranties: they sound smart. That’s not an accident. That’s the whole design.

I can’t promise you every single extended warranty is a scam. But I want you to start treating each one like it might be, until it proves otherwise. Every time a clerk, a checkout screen, or a pop-up ad offers you one, your first thought should be: Rip-off. Prove me wrong.

Start With These Questions

Before you say yes to anything, make the warranty earn it.

  • Who’s actually standing behind this thing? The manufacturer, the store, or some third party you’ve never heard of?
  • If something breaks, does someone come to you or are you tracking down a repair shop, paying out of pocket, and hoping for reimbursement?
  • What happens to your coverage if that third-party warranty company folds? (It happens more than you’d think.)
  • Can you find real, current reviews of the company actually backing this warranty, not just the store selling it?

If you can’t answer these easily, that’s your answer.

You Already Have a Warranty. It’s Just Free.

Every product that comes with an extended warranty option already comes with a manufacturer’s warranty. And here’s the part the clerk won’t mention: when products fail, they tend to fail early, right out of the gate, not months after the original warranty runs out.

That’s still true. Manufacturer reliability data and consumer research have shown for years that most defects show up in the first weeks or months of ownership, well within standard coverage. So the extended warranty is often betting against a failure window that’s already closed by the time it kicks in.

My rule hasn’t changed: lean on the warranty that came in the box. Do your own homework on the brand before you buy. Skip the add-on.

Follow the Money

Ever wonder why every single retailer, from the big-box electronics store to the toy shop, is so eager to sell you a warranty? I’ll save you the wondering. It’s money. Shockingly.

Retailers typically pocket somewhere between 50 and 80 percent profit on extended warranties, depending on the category and who you ask. Compare that to the 15 to 20 percent margin a store makes on the appliance itself, and you can see why the warranty pitch is so relentless. At one point, extended warranties reportedly made up the majority of profit at a major electronics chain, not from selling gadgets, but from selling peace of mind about the gadgets.

And if they can talk you into financing the warranty along with your purchase? Even better for them. Say you buy a $750 extended warranty on a car and roll it into your loan. After interest and the roughly 30 percent the industry actually pays out in claims, the dealer can walk away having made more off the warranty than off a fair chunk of the car itself.

That’s not a coincidence. That’s the business model. The global extended warranty market is worth well over $140 billion and climbing, because it works, on us, not for us.

What the FTC Wants You to Know

The Federal Trade Commission has a plain-English warning about these: an extended warranty or service contract isn’t worth the extra cost if the product isn’t likely to need repairs in the first place, and it’s a bad value if it doesn’t cover anything more than what you already get for free.

Before you ever say yes, the FTC says to dig into:

  • The real cost. Not just the sticker price… deductibles, shipping fees to a repair center, fees to transfer the contract, and caps on what they’ll actually reimburse.
  • Who’s behind it. Not always the manufacturer. Look them up. Search the company name with “complaints” and see what surfaces.
  • What’s actually covered. If it’s not spelled out in the contract, assume it’s not covered. Accidental damage? Routine maintenance requirements that could void your claim? Read it.
  • How claims actually work. A warranty that’s a nightmare to use isn’t worth much, no matter what it costs.

The FTC also flags something worth knowing: if you start getting calls or mail years after a purchase pushing an “expiring warranty,” be suspicious. Those pitches often come from companies with zero connection to your original purchase, and the high-pressure “act now” tactics are a red flag on their own.

Here’s a Better Idea

Skip the extended warranty. Build your own instead.

This is where I bring out one of my favorite tools: the Freedom Account. Instead of handing a retailer money for a promise, open a dedicated savings account… your own personal repair-and-replace fund and feed it a little every month. Cars, appliances, the occasional toy shaving kit. All of it.

When something breaks after the manufacturer’s warranty runs out, the money’s already there. No claims process. No fine print. No waiting on hold with a company you’ve never heard of.

And if nothing breaks? Even better. Statistics are on your side there. That money doesn’t vanish into a retailer’s profit margin. It stays exactly where it belongs. In your pocket.

Where I Break My Own Rule

I’m not immune to nuance, and I’ll admit it: there are exactly two categories where I still buy the extended warranty, because my own experience and the data both back me up.

Apple products. iPhones, iPads, MacBooks… I’m hard on my devices, and Apple hardware has a well-earned reputation for expensive-to-fix failures once the standard warranty expires. For me, the math works.

Treadmills. Mine and every other one I’ve owned or researched. Motors, belts, electronics. They take a beating, and repairs aren’t cheap. This is one of the rare cases where extended coverage has paid for itself.

That’s it. Two items. Not a whole shopping list.

Your Turn

Don’t take my word for it and don’t take the clerk’s word for it either. Sit down and make your own short, honest list… the handful of things you own that are genuinely prone to breaking down and expensive to fix. Everything else? Rip-off, until proven otherwise.

Start your Freedom Account. Say no to the upsell. Keep the money.

 

Qustion: What’s the one item you’d actually buy an extended warranty for and what’s talked you out of one? Share in the comments below.

Just talked you out of an extended warranty on a toy shaving kit? That’s the kind of thing I share every single day in the Everyday Cheapskate newsletter… practical tips, real fixes and smart ways to save money on everyday life, delivered free to your inbox. Subscribe here and let’s make everyday life a little cheaper, easier and smarter.
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13 replies
  1. Janice says:

    Never bought an extended warranty until I got all new appliances. Everything has a computer in it which makes it difficult for an average person to fix. That was the main reason I bought the warranties.

    But I did have the mother board go out on the washing machine just a couple months before the 5 year warranty was up. The extended warranty covered the part and repair. I think I paid $179 for a 5 year warranty. The mother board showed a $250 price tag. Add the repair guyโ€™s rate, so I did get my moneyโ€™s worth out of that one. But the rest, other than peace of mind, was wasted $$. I hope I donโ€™t have to replace any more appliances but if I do, I think I will skip the added warranties.

    Reply
  2. Jan says:

    Really excellent advice, Mary! I appreciate you including info by the FTC also. Thanks for everything you do – I look forward to your email every day!

    Reply
  3. Callie says:

    My teenage daughter is notoriously hard on headphones. After going through a couple pairs in as many months, I bought a warranty on our next pair. Definitely worth it! I always buy a warranty for her headphones now and we ALWAYS use it. I think a lot of it is knowing yourself (or your kid) and how hard you are on your stuff.

    Reply
  5. Marty Longo says:

    I bought an extended warranty for a vcr dvd machine I had. The model I had , had a reputation for having a mechanical breakdown after 14 months of usage. It would stop playing back on color. It would only play back in black and white for both the DVDs and VHS tapes. Well after 14 months, I had that issue as well. I bought a 2 year extended warranty. The company repair the issue . My player lasted for another 12 years. The cost of the repair and shipping if I paid out of pocket was $140. Only spent $25 on the warranty. Money well spent. Replacement cost would have been almost $100– it was that expensive because of the VHS player that was attached to the dvd player. If I would have bought a dvd only player, my cost would have been around $50

    Reply
  6. Dottie Schafer says:

    The Big Lots cashier talked me into paying an extra $8 for the warranty on this 8×10 area rug I purchased. He said his dogs ruin his rugs and he returns them for a replacement! I’m going to try to return mine soon and will report back as to how they do!

    Reply
  7. Debbie Cook says:

    My 50 yr old sewing machine is almost dead. If the hubby can’t fix it, I plan on buying a basic sewing machine, a Brother, for $126, is it wise to get the 4 yr warranty for the $30?

    Reply
    • Mary Hunt says:

      I wouldn’t. Brother is a quality machine. I’ve been sewing for decades on several machines. Not one has ever broken or needed more than a good tune up (not covered by any warranty!) Save your money and enjoy the new machines!

      Reply
  8. Red says:

    Years ago I purchased a small freezer from Montgomery Wards. (I probably donโ€™t need the years ago, but I digress!) I paid $59 for it on a great sale. After a few years I started getting aggressive solicitation to buy an extended warrantee for just $79! Say what? Why would anyone think that was a great deal? I even asked once whether they genuinely thought that was a great deal, I got basically an answer that it could be if the freezer failed. I still shake my head about that, especially since the freezer is still running and has out lived a large upright freezer by more than multiple decades!

    Reply
  9. Janet says:

    How about an extended car warranty that you use for work? It doesnโ€™t cover as much as I would like but on the items it does cover Iโ€™m glad to have it.

    Reply
  10. Judy says:

    Remember the extended warranty will probably end if the company goes out of business. That is what happened to is when the furniture store we bought our leather sofa closed.

    Reply
  11. Cherlyn Randall says:

    The only extended warranty I buy is for my electric water heater. My water is so hard that it’s a guarantee it will fail shortly after the manufacturer warranty ends. It has saved me hundreds over the years.

    Reply

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