Consumer Reports Calls You A "Pushover" For Buying The Extended Warranty Sales Pitch

Consumer Reports makes no secret of the fact that they think extended warranties are a big old waste of money for consumers, but now they’ve actually launched an advertising campaign against the warranties, says the New York Times.

Not surprisingly, the car dealers who sell the extended warranties disagree. A spokesman for the National Automobile Dealers Association likened the warranties to insurance for which, of course, policy holders as a group pay more than they get back to protect against the rare problem that is ruinously expensive.

Kenneth Weine, a vice president of Consumers Union, said the ad campaign is a way to further the group’s mission, “to make the market a better and safer place for consumers.”

The basis for the campaign is a new survey that shows that most extended warranty purchasers lost money on the deal.

From Consumer Reports:

But extended warranties sell costly “peace of mind” for repair nightmares that probably won’t occur, according to a survey of more than 8,000 readers in December 2007 by the Consumer Reports National Research Center. We have long advised that extended warranties are a poor deal for almost every product. Now we have the first data showing that this advice applies to most new cars as well.

The survey found that warranty buyers on vehicles from the 2001 and 2002 model years paid an average of $1,000 and received $700 worth of repairs in exchange, says the NYT. A full page ad will appear in Tuesday’s USAToday, warning against extended warranties and featuring a sign that says “Pushover on board.”

Bearer of Bad News Decides To Advertise It [NYT] (Thanks, Molly!)

RELATED: Extended Car Warranties Are A Ripoff


Edit Your Comment

  1. Coelacanth says:

    Granted, if you’re financially solvent, buying an extended warranty on a car in which the average consumer recovers only 70% of its value.

    However, the peace of mind that comes with not facing a large, unexpected bill is quite good.

    Besides that, you can finance the warranty cost for much cheaper than an unexpected auto repair.

    Now, for most consumer goods, the extended warranty probably a much greater financial sinkhole.

  2. picshereplz says:

    I don’t need health insurance because chances are I probably won’t get cancer.

  3. Nice!

    Love teh CU

  4. B says:

    @picshereplz: And when you do, the insurance company won’t pay for the treatment anyways.

  5. thirdbase says:

    Ah even if you buy the warranty and the car breaks they’ll find a reason not to cover the repair.

  6. snoop-blog says:

    remember it said most “NEW” cars. always get the warranty for a USED car PLEASE! I’M BEGGING YOU!!!

    i sell cars, and get sick of all the calls from people who didn’t buy it, and think we should still somehow be responsible to fix their car for free.

    it is a used car, and no mechanic can tell you for sure how many more miles a part may have left. not even a really good one. we may sell a car that ran perfectly for us, 10,000 miles later, needs a new engine.

  7. lonewolf333 says:

    Only suckers by extended warranty’s. When I bought my laptop I skipped the extended warranty and the only thing that went bad with it after the free warranty ended was the hard drive. I just bought a brand new hard drive. If I had got the extended warranty they would have gave me a used hard drive as a replacement.

  8. pibbsman0 says:

    @COELACANTH: Couldn’t agree more. The car I sold my sister still had the extended warranty I bought when the motor blew at 50,000 miles. Total cost for repair: $2000.00
    Total she paid: $150.00. Way more managable for someone who makes 250.00 a year.

    CU: If I want your opinion, I’ll buy your magazine.

  9. pibbsman0 says:

    Note: 250.00 a week, not a year. My brain not work so good on monday.

  10. kimsama says:

    @pibbsman0: I hope your sister doesn’t really make $250.00 a year.

  11. kimsama says:

    @pibbsman0: Thank god for that ^_^

  12. picshereplz says:

    @lonewolf333: Do you understand how irrelevant your story was?

  13. horkles says:

    @lonewolf333: I’m normally pretty much against extended warranties, but my wife got one on the laptop she bought from Best Buy, and over the course of three years, Best Buy gave her two new laptops and a new motherboard. Not bad for the $250 she spent.

  14. lonewolf333 says:

    @picshereplz: No please explain it to me.

  15. nequam says:

    CU isn’t merely suggesting that you don’t purchase extended warranties, they’re also suggesting that you do your homework and purchase a reliable car. Maybe the second part is just common sense, but then how does one explain why people continue to purchase cars with terrible track records?

  16. lonewolf333 says:

    @horkles: But if you had bought a good laptop not from BestBuy you might have never needed to replace it in the first place.

  17. picshereplz says:


    You say extended warranties are for suckers and to prove it you cited a single example of you kinda sorta not needing the warranty anyway.

    You understand that the point of warranties is not that the product you just bought is guaranteed to break, right?

  18. B says:

    @nequam: They judge cars on other things (looks, performance, cost) besides reliability.

  19. numindast says:

    In 2003 I bought a used 2001 car. The seller quoted $2,000 for an extended warranty. Good thing I did. The warranty company has paid out over $6,500 in repair work so far. (That said I am getting rid of the car, it’s obviously a lemon.)

  20. lonewolf333 says:

    @picshereplz: Dude, buying a new hard drive cost less for me than buying the warranty.

  21. The guy who lives across from me suddenly built a 14,000 square foot mansion, a 54 horse stall barn, an indoor horse arena, and a giant fence around the former farm. It turns out he had just sold his company for 10 Billion dollars, of which he kept 4 and his investors got 6.

    and can you guess what kind of business he ran….

    extended warranties.

    That’s how I know they’re a waste of money.

  22. snoop-blog says:

    @B: thats because reliablilty is bs when it comes to cars. i can tell you buick’s are the most reliable car i sell off my lot (and they are), but that doesn’t mean the buick you buy won’t have issues during your ownership. it’s all a crap shoot. but a lot of it is who’s sittin behind the wheel. there’s no way i’d buy a mustang knowing the first owner/driver was 16-21. the expression is ‘lady driven’, and it didn’t arise from nowhere.

  23. StevieD says:

    Let’s see. $909 extended warranty purchased at the end of the manufacturer’s 3 year warranty. $3200 in covered repairs (power window motors x3, one wheel bearing, CV joint, fuel gauge, fuel pump, oil pressure sensor, hazard lights control and a few other minor things)and no out of pocket expense in the 4.5 years since the manufacturer’s warranty expired. Still have 6 months left in coverage on a to be 8 year old car.

    Yep, that extended warranty sure was a bad investment.

  24. RokMartian says:

    I, too, am someone that benefited from the extended warranty. I put a decent amount of mileage on my car so the manufacturers warranty is usually up a lot earlier. My power steering pump would have cost me 1,500 to replace, so it has paid itself off.

    Here is a tip – if you finance through a credit union, check to see if they have a extended warranty you can buy. Usually it is a little cheaper and you are not forced to take your car to the dealership you purchased it from for service.

  25. picshereplz says:

    @lonewolf333: Are you trolling?

    How many months have there been when you had car or health insurance and didn’t need to use it? All insurance is also a scam, then!

  26. Zimorodok says:

    When I was buying my brand-new, not-on-the-lot-for-a-week-yet Toyota, the finance guy kept trying to upsell me on a $3400 extended warantee. “In case the engine fails and needs to be replaced, you’ll save a bundle!” I asked him what the failure rate was and he hemmed & hawed for a bit but finally admitted it was something like 3 out of 100.

    “So you’re telling me that there’s a 97% chance that I’ll be throwing money away on this warantee?” Yeah, that shut him right up.

  27. gStein_*|bringing starpipe back|* says:

    i bought an extended warranty on my first laptop.
    2 years after purchase, i had mobo issues- BB junked out my laptop, and gave me the original purchase price of the laptop back as in-store credit. the warranty cost me about $200, but i wound up with $1200 back from the original laptop cost.

  28. evslin says:

    Moral of the story: the extended warranty is only a wise investment if you buy a craptacular vehicle.

  29. lonewolf333 says:

    @picshereplz: I don’t have health insurance :)

  30. gStein_*|bringing starpipe back|* says:

    @meg: can we get some sort of poll up to see who has had an extended warranty pay off vs lost money on one?

  31. EE2000 says:

    The warranty on my wife’s used mazda has nearly paid for itself in the first year (windshield, EVAP sensor, EVAP purge, O2 sensor, gas cap & related labor)

    It wasn’t too expensive for the amount of coverage it provides, plus added towing and rental service (if over 24 hours)

  32. nequam says:

    @B: You’re absolutely correct. But I don’t think performance and cost should be devoid of reliability considerations — unless of course one is only concerned with upfront costs (as opposed to total cost of ownership) or the enigmatic “initial quality” (i.e., “when it runs, it runs great”). In those cases, maybe an extended warranty is worth it?

  33. wellfleet says:

    @Zimorodok: I’ve never purchased a car… But there’s an equally small chance that I’ll break my front tooth and need a bridge. But I did, and without dental insurance, I’d be about $6000 in the hole. Some consumers can’t weather the financial suckerpunch of unexpected expenses. So if you finance the warranty, you won’t be in a position where you have to come up with $2000 fast.
    I run the Geek Squad precinct now, and even the best laptops, the top-of-the-line HPs and Toshibas are made on an assembly line out of a gazillion parts. If the HD or MOBO go bad, the warranty is worth it.

  34. Doofio says:

    There is absolutely nothing wrong with buying an extended warranty. You are not a “sucker” and you are not wasting money. Yes, it’s true that warranties are only worth it if you actually come into a situation where you can actually take advantage of it, but when that situation comes, you’ll be damn happy you’ve got coverage.

    It’s basically an argument with no real right or wrong side. Will my product break? Maybe it will and maybe it won’t, but at least I know I am covered when/if it does. If it doesn’t break and no warranties were purchased you can say “see! I told you the warranty would have been a waste!” but I guarantee that those very same people would be singing a very different tune if something DOES happen and they opted out of extended coverage.

    The part that makes me chuckle is that people are willing to shell out thousands of dollars for expensive gadgets, yet won’t pay an extra couple of hundred dollars to protect their purchase for years after manufacturer warranties expire..and yes, I’m aware of the logic that if you’re paying thousands of dollars for something, it should NOT break…it’s a nice fantasy, but far from reality.

    I work for a company that processes warranty claims for a lot of major retailers in the US and abroad, and my question to all of the nay-sayers is this: If warranties are such a waste of money and you’ll almost never utilize it, why are thousands of claims processed on a daily basis?

    Bottom line is, if you want peace of mind, buy the warranty. If you want to rely on *chuckle* manufacturer dependability, then don’t buy the warranty.

  35. stevegoz says:

    Why buy the extended warranty when there’s rust-proofing and undercoating to be bought???

  36. nequam says:

    @snoop-blog: But, you must admit that there are ways of improving your odds of getting a decent car by sticking with manufacturers with good reputations for reliability, and proven models. You can’t say, for instance, that Honda has not earned its reputation for reliability, especially with respect to the Accord — and this is further borne out in resale valuations which are primarily based on expected reliability. Just as some makers have earned their poor reputations.

    Of course, the risk of getting a lemon is probably the same no matter what you purchase. And there is always the risk of serious systemic failures, but those would be covered in a recall in which case the warranty is irrelevant.

  37. Steve Trachsel, Ace says:

    I dont know about the rest of you, but peace of mind is actually pretty valuable to me. I know that paying an extra 1k for the warranty to ensure that I dont get hit with a large repair bill for the next five years is worth it to me. (Even if Im paying a premium)

  38. backbroken says:

    Allow me to sum up the thread for anyone who doesn’t want to read it from the top:

    “One time 3 years ago I bought an extended warranty and it paid for itself. Therefore all extended warranties are good!”


    “One time 3 years ago I bought an extended warranty and it was a waste of money. Therefore all extended warranties are bad!”

    Does that cover it?

  39. backbroken says:

    @Tracy Ham and Eggs: If a false sense of security is your bag, then go for it!

  40. chazz says:

    Here’s how crazy it is. I bought am extended warranty on my USED Land Rover. $1600. They replaced the radio, that was it. Yet somehow I didn’t feel ripped off – that peace of mind thing is powerful when it comes to car repairs, almost as powerful as Health insurance peace of mind.

    As a person who bought his first car in 1969 a VW bus I have never gotten it into my head that cars are a million times more reliable now than back in the day.

  41. joemama321 says:

    This is nearly the same comment I put in on the last story regarding warranties on used cars:

    There is no right or wrong answer here. I repeat: there is no right or wrong answer here.

    This debate all boils down to the concept of “risk aversion”. Risk aversion states that one is willing to pay a premium beyond their expected loss in order to transfer risk in exchange for a certain outcome. This is why the insurance industry exists for the individual market and why they can make a profit. In this case, you transfer your risk of financial loss from a breakdown to the warranty issuer for $x and, assuming no deductible, you can be certain that if y or z happens in w years, you’ll only pay $x. Similarly, if nothing happens, you’ve still paid $x. The uncertainty is gone. For almost everyone, removing risk of loss has value. How much value varies by individual. That is your degree of risk aversion.

    By definition, you are risk averse if you:
    A.) Believe more money is better than less money; and,
    B.) Exhibit decreasing marginal utility of wealth (e.g., If I had as much money as Bill Gates has, I would be less likely to stop and pick up a quarter on the sidewalk than I am now.)

    Very risk averse individuals may be fine paying 100% more than what they expect to lose (the average loss). Those people would then accept an extended warranty that the dealer sells for double its true cost (assuming the manufacturer is selling them at cost.)

    Other people are barely willing to pay beyond expected losses. They are less risk averse.

    Therefore, “rip-off” is unequivocally in the eye of the beholder.

    All that said, you are clearly going to get a biased view on this board if you are looking for anecdotal evidence. I’m willing to bet proportionally fewer people are willing to get on here and say, “Yep, I paid for it and didn’t get a dime in return.”

  42. AcidReign says:

        I buy used cars, from big places like Carmax or Driver’s Way. And yes, I get the extended warranty. I didn’t use the one on my last car, but the car before that needed a new engine after only a month. A Camry engine costs more than 4 extended warranties…

  43. snoop-blog says:

    @nequam: you are absolutely right. you can improve your odds, but i’d still get the warranty, cuz as you put it, it’s all odds, and unfortunately you have no way of knowing if this was one of the 3 out of the 100 example that was sited earlier. car problems aren’t minor. by that i mean, even “small” jobs can cost over $200 easily. knowing that it makes perfect sense to get the warranty on a used vehicle, as most new cars come with a pretty excellent warranty for free anyhow.

  44. kenblakely says:

    @lonewolf333: Whelp, I have to disagree. When I buy a piece of electronics, I usually also buy the extended warranty. Why? Two reasons:
    1) Extended warranties are pure profit, and salespeople / managers *LOVE* to sell them. Thus, if I’m looking to shave 15% – 20% off of the price in a haggle – which I quite often do – buying the extended warranty is almost always enough to seal the deal. in the end, the reduction in price usually pays for the warranty and then some.
    2) Extended warranties are implemented by third party providers who couldn’t really care less if your item is really broke or not. Make a claim, and you’re gonna get paid. thus, I make it my business to have all my electronics break within the extended warranty period.

    Result: I get money to replace the item or, just as often, to buy something else. Beautiful!

  45. britne says:

    @thirdbase: yeah, most of the time… still got my money’s worth out of the warranty tho. paid $1k-ish, had them cover well over $2k in repairs. in addition to our $2k out of pocket… (yeah, this car was a mess).

  46. dreamcatcher2 says:

    The article kind of offhandedly touched on the topic… but in car insurance at least it’s standard for companies to pay more in claims than they receive in premiums. They make up the difference by investing the money while they’re holding on to it.

    I think this could just be a sign of the relative youth of the consumer products insurance industry… all young industries that don’t start out profitable will die young. I’m sure retailers would hate to release their stranglehold on the market, but it’s certainly possible that we’ll see the industry be commoditized to the point that when you buy your ipod at wal-mart there will be 3 extended warranty plans offered by third parties you can choose from.

  47. Mary says:

    @Zimorodok: I had a similar experience. I was trying to decide what kind of car to buy, and everybody and their brother told me to go with the Honda because “Hondas NEVER break! They’re perfect! They’re reliable! No repair costs!”*

    The _second_ I signed the form saying I wanted the car the finance guy started in on me. “But what if something breaks? This is how much each part costs! It would be a tragedy!”

    I was baffled, and couldn’t figure out how the sales people who told me the car would last forever and the finance guy who said I’d be an idiot for not getting extended coverage could both be right. Thankfully my father-in-law saved me by looking the guy straight in the eye and saying, “In three years, when the manufacturer warranty runs out, I’ll be able to get the parts at any AutoZone and fix it myself. We don’t need it.” After that it was back to “Hondas are so reliable!”

    *Did I mention a month after I buy the car and get it to 1,000 miles I find a story on Consumerist about my exact model having big problems with the transmission that might involve a recall? Yay.

  48. Verdigris says:

    Bought a new car last year and got the extended warranty for $1,000.00; seemed like a good thing to do.

    Cut to last week, engine light kept flashing. Took car in, estimated repair was $2,500.00.

    Guess it’s all about luck… or lack thereof…

  49. picshereplz says:

    @lonewolf333: I suppose I was just asking for it by arguing with someone who buys computers but goes without health insurance.

  50. greensmurf says:

    @Verdigris: Wouldnt that be covered under the manufactures warranty?

  51. jeff303 says:

    @johnarlington: Sorry but this doesn’t prove anything. I could probably find a similar anecdote about someone in the (insert any industry here) business.

    Not saying extended warranties are good, mind you…

  52. squidbrain says:

    I take all the money I don’t spend on all the extended warranties I’m offered and don’t buy (so far, 100% of them) and put it in the bank as my own “insurance” for broken items. And I get to collect the interest.

    OK, not really, but you get the point.

    And besides, aren’t products supposed to last beyond their warranty periods? If not they must be crap and I’ll stay away from those product brands in the future.

  53. snoop-blog says:

    @Verdigris: boy are you right! if it wasn’t for bad luck, i’d surely have no luck at all!

  54. chrisjames says:

    “Our advice: buy a reliable car and skip the warranty.”

    Ok CU. I’ll listen to that when you provide a roadmap for developing a proper reliability index on new AND used cars. That’s right, I want to reliably know how reliable a car is, and is going to be for a certain period of time that I expect to use it.

    That includes unexpected part failure, expected collision rates (tiered by estimated cost of repair) for my specific driving record (and projected record, just for fun), general maintenance issues including costs for service and replacement for parts beyond their useful life, and, oh hell, how about acts of God too… for giggles. Make sure this is all specific to the car, previous drivers (little old ladies on sundays included), driving schedules, and the regions of the country I plan to drive in.

    Hmmm, that’s asking a bit much, though. Maybe we can condense that a little. And since that’s a lot of data to collect and analyze, how about we instead let the market decide what’s best. I know, we’ll even generalize this to a single purchase, like insurance, just in case something should happen outside our nominal projections. Yeah, that’s… wait a minute!

  55. snoop-blog says:

    i do want to clear one thing up, but it matters little. when talking about cars, a warranty is FREE, if they are charging money for it then it is called a “service contract”. although, most dealerships brake the rules and still call them all warranties.

  56. Snarkysnake says:

    C’mon ,people ! This is a numbers game.

    Cars are getting better. They have to because of the cutthroat,unforgiving nature of the market in North America…(If you’re reading this in France,I’m glad you got stuck with Renault). Time was , your choices were DESIGNED to die after 3 or so years because the big 3 wanted you back in the market to make them a little richer and more powerful. Now ,thanks to our good friends the Japanese (sorry about that Hiroshima thing) , you can buy a reliable 3-4 year old car and tell these warranty companies to piss up a tree.
    “Piece of mind “, my ass ! These things are so riddled with exceptions and gotchas that you would be better off putting the cost in a savings account and paying out the money as needed.

  57. snoop-blog says:

    @nequam: let me say you’d be better looking for a reliable dealer, than a reliable car. wimi (what i mean is) a good dealership will do you right reguardless of the car or warranty. to touch on what@Snarkysnake: said, at my dealership, the warranty states you must have receipts for oil changes and the changes must be done every 3,000 miles. but do we actually hold to this – no. we’re not a-holes. we want to make you happy and do the right thing.

    so maybe look for a well reputable dealer instead of a well reputable car.

  58. TechnoDestructo says:

    Sounds more like that CAR was a bad investment.

  59. BeFrugalNotCheap says:

    Hah, my mom bought an extended warranty when she got her 17″ flat-screen TV at Target. I pointed out a blue pixel in the upper right hand corner and her response was “Well, they’ll probably find some way of not covering it” to which I replied “Then why did you buy the warranty in the first place!?” I love my mom, but she’ll always get pulled in by sales staff.

  60. radio1 says:

    Whenever I’ve purchased a used card at a dealership, I get the spiel about how it’s a great *value*… So, I look at what’s covered, and it’s like nothing you would ever actually have repaired… ever. But then those were also 3rd party warranties.

    Perhaps an extended warranty from the manufacturer or dealer, might be better?!

    As far other extended warranties go, I’ve always a had a problem with the price. It’s always just enough to make me say nahhh. But there are times when I have purchased them for electronics… My track record is not so good:

    ~33% of the stuff I’ve had and bought the warranties for I’ve needed.
    ~33% of the stuff I’ve had and bought the warranties for I’ve not needed.
    ~33% of the stuff I’ve had and not bought the warranties for I’ve needed.

    My problem has been figuring the two last categories: which should be in the former and which should be in the latter…

  61. Ass_Cobra says:

    I had an extended warranty that totally paid off in spades. It was for a Saab though which has a bunch of weird parts (this was before they were GMified). I never had a hassle getting repairs covered and was in the black on it by the first year after the MFG warranty went away. Now this may speak more to the quality of engineering in the car than the value of warranties but I would say depending on the car that you buy an extended warranty can be a valuable thing.

    To the guy that had a Land Rover and only had to replace the radio, I say buy a lottery ticket that is some kind of incredible luck.

  62. Primate says:

    In other news, people pay more for car insurance than they get back.
    Seriously, is this a surprise to anyone? I’m not against or for service plans. You buy it if you want piece of mind, you don’t if you want to take your chances.

  63. ogman says:

    I wonder how many salespeople who sell extended warranties have posted in this thread?

  64. aikoto says:

    I used to sell extended warranties and I’ve learned that they CAN be very valuable… if you know how to use them, have the tenacity to fight for your rights, and remember that you have it when there’s a problem. For people lacking any of these three, they’re a waste.

    I have a whole write up on it here:

  65. YouCanEatMe says:

    Only a dolt buys these things. Some ass at best buy tried to tell me that the 3 year warranty on the 360’s RROD was an “internet myth” and that I NEEDED the extend plan. I said, no, I NEED to go buy this 360 elsewhere. I mean really, resorting to lying to sell these things?
    One of my great joys is being in Best buy listening to sales pitches and them calling them on their bullshit in front of customers. You amazing tales like “1080P is FAR better than hi def, it’s like 3d!” No joke, I heard that on Sunday.

  66. NYGal81 says:

    I guess it depends on who you are and what you’re buying. I bought at 2004 Honda CR-V about 4 years ago. I was baffled by the fact that Honda’s standard warranty is so short (3 years, 36,000 miles). I knew I was going to drive the car alot, so I sprung for the extended warranty–I think it doubled it original, though I can’t remember–for an extra $1500. Paid off at a little over $100 per month, I felt incredible peace of mind knowing that it seemed like a small price to pay to have double the coverage. It all depends on what kind of risk you’re willing to assume. As a graduate student with a slim budget, I’d rather pay a little bit more to have better coverage in case something major blew out in the next 6 years. Now, do I consider myself gullible? Hells no! But I do consider myself someone who is not really willing to assume what I consider to be undue risk. It’s the same reason I have health insurance. I’m a healthy person, but who says tomorrow I don’t go to the doctor and wind up diagnosed with cancer? I’d sure wish I had insurance at that point, man.

    I generally agree with CU and their denouncement of certain types of extended warranties, but when you’re talking a car–a major investment–I’m not sure the same applies. There’s no way I’m buying an extended warranty on a clock radio or a DVD player.