Radio Canada: Don’t be spooked by extended warranties, expert says

Lots of people who buy electronics avoid extended warranties, but in some cases they're worth considering, an expert says.

David Soberman, a strategic marketing professor for the Rotman School of Management at the University of Toronto, wrote his thesis on extended warranties.

"The thing about warranties is they are directed towards people who are risk averse, that is, people who are willing to pay a premium in order to have the peace of mind of not having to make cash outlays over the course of owning a particular item. And because there’s a premium being paid I prefer, myself, to self-insure. But certainly for some people who worry about the cost of repairs, unexpected expenses, warranties can be quite valuable."

"What people should tend to do, and this is what I think, this is my opinion, is that when you buy a product and you use it quite heavily and you know that the long term likelihood of product performance is a function of the amount that the product is used, then warranties can be a good investment. An example might be, you’re a family, you buy a washing machine, but you actually have a big family, so you have four children at home for example, so there are six people in the household. This is the type of family that might make very heavy use of the washing machine; you might do two loads a day or something like that. In that particular case, buying an extended service warranty or and extended service contract from Home Depot or from Why, because your likelihood of failure is higher than somebody who’s living by themselves and buys the same machine."

To listen to the full interview visit the link below: