Extended warranties have a sometimes deserved reputation as being expensive (more due to the markups of some companies that sell them) and consumers question whether it makes sense to purchase them.

Buying an extended warranty is like buying additional insurance for your product. If something goes wrong beyond the initial manufacturer warranty period, you are covered. Some extended warranties even include accidental damage coverage. So if an mp3 player is dropped by accident and breaks, the item will be repaired or replaced. For very expensive items, it may make sense for a consumer to pay a small percentage of the total purchase price for an extended warranty and be protected for an additional number of years in case something goes wrong. In addition to potential savings from claiming under an extended service contract, reduced stress from knowing you are covered has some benefit. Some refurbished items may be bundled with warranties that are for very short time periods (perhaps as little as 90 days), and therefore it may make sense to pay for an extended warranty to cover a time period of up to an additional two or three years.

Each person needs to examine the following when considering purchasing an extended warranty:

* Evaluate your financial situation (can you afford to have a TV breakdown once the original warranty expires)
* Cost of the item being purchased
* Length of the original manufacturer warranty
* Expected useful life of the product (don't buy a five year extended warranty if you expect to use an item for two years)
* Ability to sleep well with or without warranty coverage (piece of mind knowing you are covered)
* The company who is providing the extended warranty coverage and who will be providing servicing if something goes wrong (not the seller of it)
* Cost to repair the item if it breaks down (electronics can be costly to repair and unless you are an engineer, it is unlikely you can make the repair yourself)
* Likelihood of the item to break; if the item is a completely new electronic gadget by a company, there is probably a higher chance of a breakdown at some point (ie. when the first Xbox 360 came out, there were significant manufacturing issues)

If after evaluating all of the above you decide to purchase coverage, the best advice is to shop around as not all warranties provide the same benefits and prices vary across sellers.