"It really does depend. I can't say that they're always a bad deal or always a good deal. But I think there are some things to be careful of if you're thinking about an extended warranty," says University of Wisconsin financial specialist Michael Collins.
Collins says one of the first things to think about when deciding whether to buy an extended warranty is, how much would it cost to replace the item, and is the price likely to go down.
"Certainly, anyone who's bought any technology item in recent years could have bought that item a year later at half the price. So, an extended warranty may not be worth it in those cases because you can just buy a replacement."
As a general rule, the more expensive the item is to repair, the more you'll want to consider an extended warranty.
"So then you have to ask yourself, how likely is it that this will break and how much is this extended warranty going to cost? That's what it really comes down to: are you willing to take the risk that you may have to replace it, which could be a lot of money, or are you willing to pay for this upfront cost."
And, Collins says it matters -who- is actually offering the extended warranty: the store, the manufacturer, or an outside company.
"Say you're purchasing it at a store, and they're offering an extended warranty that's offered by some other company and you don't recognize that other company, it's probably not worth the risk, because you don't know if they're really going to be around to back up that warranty or not.
I think the unfortunate thing about extended warranties is that it's a quick transaction that takes place as you're trying to get out the door. There are people behind you in line, so it's not a great time to make a financial decision, yet people are often forced to make these decisions on the fly."
But you need to resist that pressure to make a decision on the spot. Take time to read the fine print so you know exactly what it covers.
Often, there's a deductible amount or flat fee you have to pay so you don't save much, if any, over just having it repaired.