Do You Really Need That Warranty?

By Scott Budman
|  Wednesday, Dec 16, 2009  |  Updated 8:33 AM PDT
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Does that MP3 player need a warranty?

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So you found the right music player, or computer, or television. You checked under the hood, looked at the specs and you're ready to buy. But now, you have to make a "snap" decision: do you buy the store's extended warranty or not?

But Consumer Guy Ellis Levinson, a longtime consumer reporter, says to think twice before re-opening your wallet

"The reason (stores) want you to buy the warranty is because they make a lot of money on them," he said. "The odds are you won't spend as much money to get the thing repaired, as you would for the warranty itself."

So what does he suggest doing with the money instead?

"Every time you think of buying a warranty, don't buy it," Levinson says. "Put it into, let's say, a conservative bond mutual fund, and start your own warranty fund, that's the money you use to pay for any repairs you might need."

But retailers say a warranty is not about making money it's an investment for piece of mind.

"We're gonna cover a lot more than the manufacturer does," Best Buy's Dallas Carter said. "We cover accidents. Things we can help cover, where a manufacturer wouldn't."

It can be a tough call depending on who you trust. On the one hand, extra security for you, or the person you're shopping for.

On the other hand, you've already spent a bunch of money and the extended warranty can range from $10 to $400.

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