When consumers purchase a service contract (also called extended warranties), they are betting that the cost of the contract will be less than the repair costs they would have to pay without it. In general, on appliances and electronic products, that is a losing bet.

“More than 80 percent of service contracts are never used,” reports Gail Kerns, ISU Extension Resource Management Specialist. “In fact, Consumers Union has found that less than one in four electronics products has required any repair even by the time it is four years old.”

Kerns recommends that consumers research products thoroughly, including examining repair histories, before purchasing major appliances or electronic items. Service contracts for products with a history of low repair need and from reputable companies seldom are a good value.

“You are better off putting your time into comparison shopping and buying a reliable product than buying a service contract,” she said.