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Shoppers are seeing volatility in pricing

April L. Brown

Here's a scenario familiar to anyone who has ever bought electronic goods, furniture or appliances from a large retailer. As soon as you've decided to purchase the object of your desire, a salesperson approaches to sell you the extended warranty. I've often flailed in these situations. While I don't want to spend more, I suddenly envision my coveted new gadget breaking and becoming an expensive paperweight under the manufacturer's limited warranty. Most of the time I swallow my fear back and save the extra money. Although, in the case of my apparently fragile Apple iPod, I wish I hadn't.

As you shop this holiday season, you may be wondering whether the extended warranty is worth it. According to the latest findings from Consumer Reports magazine, it isn't.

"This holiday season, shoppers are expected to spend over a billion dollars on extended warranties for laptops, flat-screen TVs, other electronics, and appliances," the Consumers Reports team wrote in its blog this week. "And almost all of it will be money down the drain."

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The magazine believes extended warranties are "notoriously bad deals" for consumers because repairs are often covered by the standard manufacturer warranty. Its research also found that products rarely break within the extended-warranty window, typically within two or three years after the purchase is made.

"Even when electronics and appliances do break," Consumers Reports says, "the repairs, on average, cost about the same as an extended warranty."

Retailers love selling these warranties, of course, because they get to keep 50 per cent or more of the revenue, a profit margin that is vastly higher than what they earn on the actual product. The Consumer Reports National Research Center found that over 60 per cent of shoppers name "aggressive pushing of extended warranties" as the most annoying part of the shopping experience.

While Consumers Reports generally advises against buying an extended warranty, it allows that cautious consumers may want one for a repair-prone brand.

If you feel you must buy the extended warranty, at least keep in mind Consumers Reports' advice: Don't pay more than 20 per cent of the purchase price of the product and always try to negotiate a better price.

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