How can a consumer tell whether extended warranties are a good investment or a waste of money? Extended warranties provide peace of mind, but they’re “almost always a bad idea,” said Mark Kotkin, director of survey research for Consumer Reports.

How can a consumer tell whether extended warranties are a good investment or a waste of money? Extended warranties provide peace of mind, but they’re “almost always a bad idea,” said Mark Kotkin, director of survey research for Consumer Reports.


“With rare exceptions, it’s just not a good idea because most products don’t break down during the time of the extended warranty.”


For example, home electronics often come with a one-year manufacturer’s warranty; an extended warranty will cover an additional two to four years. Problems will most likely occur after that time has elapsed, Kotkin said.


While the profit margin on a specific item like a digital camera may be small, the extended warranty is often 100 percent profit for a manufacturer. Additionally, the cost of repair is often less than the cost of the warranty. After two or three years, instead of repairing, it might be time for an upgrade, especially for electronics.


If you have bought a lemon, persistent liability problems will usually become known during the factory warranty period, but not necessarily within one year.


Instead of trying to protect yourself from future problems, “be sure whatever product you choose, whether it is a TV, washing machine or car, is reliable and less repair-prone,” said Jonathan Linkov, managing editor of autos for Consumer Reports. “That’s why we have reliability surveys each year and data on all kinds of products.”


Here’s a look at a few items.


Cars


Buy reliable in the first place, said Linkov. “Buying a reliable Honda Accord or Ford Fusion means you can take the $1,000 to $3,000 that some extended warranties cost and put that money in the bank. You can then use it for whatever repairs may creep up.” If your heart is set on something less reliable, purchase the warranty.


Flat-panel TVs


Consumer Reports has found that plasma and LCD TVs are highly reliable and require few repairs during the first three years of use. Skip the extended warranty.


Computers


Most desktop PCs come with a year of tech support, so you’ll be better off paying to fix the computer if it breaks. On the other hand, a warranty for a laptop might be worth it, if you’re the kind of person who might drop it.


Travel insurance


The U.S. Travel Insurance Association says about 30 percent of people buy travel insurance. Travel insurance is helpful in case of cancelled flights; lost bags, medications or passports; medical emergencies in foreign countries; airline or cruise line bankruptcies; terrorist attacks, natural disasters or illness.