Are extended warranties worth the money?

Almost my entire life, I’ve been an anti-extended-warranty kind of person – simply because there’s very little chance of your ever needing it, and the cost is high considering the very small chance you’ll need to cash it in. An extended warranty is simply a service contract that you make, usually with the seller, for an extra cost above and beyond the price of the item; it’s a promise to repair or possibly replace the item if it malfunctions within specifically laid-out parameters, within a specific amount of time. Pricier items will come with a manufacturer’s warranty built into the regular price – that’s different from an extended warranty, definitely something you want to ask about when investing in electronics or appliances or an automobile.
 
In most cases, it seems clear to me that most extended warranties are cash grabs by retail stores. For example, an iPod touch sells for $199 at Best Buy and you are invited to buy an a three-year extended warranty for $89.99, or just under half the cost of buying a new one. Not worth it, in my opinon.
 
The Canadian government’s Consumer Information Gateway counsels you to consider a few things before buying an extended warranty, including:
-          How long do you expect the item to last, and how long is the manufacturer’s warranty?
-          How much does the extended warranty cost compared to the cost of a replacement item?
-          What’s covered by the extended warranty? Is that what’s likely to go wrong?
 
My whole life, I’ve never bought an extended warranty, and I’ve never regretted that stance. Until last week, that is.
 
Our MacBook died. A thousand bucks, shelled out two years ago, up in smoke. It had been acting up for a couple of weeks, starting with the keyboard not functioning properly, and devolving into a scary pop-up message, in about six languages, warning, “You must power down your computer now.” The computer powered down on its own, and would not be turned back on again.
 
“It could be the battery,” counseled one of my tweeps. “I’ve heard they go after about two years, and that’s why you should always buy the AppleCare warranty.” Oh. No. We did not buy the AppleCare extended warranty.
 
“Let’s take it in to the repair shop,” Matt and I agreed. So we dropped it off at the shop. “It looks like your battery is taking a charge – see how the power cord is lighting up?” said the guy who helped us. “The fact that we can’t turn it on by pushing the power button – that’s not a good sign.”
 
We agreed to pay $65 for him to run diagnostics on our non-functioning computer (oh, how I missed it already!), the cost of which would be put against any repairs we agreed to.
 
The next day, he called in with the bad news. Our computer’s logic board needs to be replaced. The cost? $550, or half the cost of buying a new computer.
 
“What do we do?” I asked Matt.
 
Here’s the thing: I’m in no rush to spend another $1,000 on a brand-new computer. But the warranty on the logic board is only 90 days. If it dies again – or if something else goes wrong with the computer after the repair – we’re on the hook for even more pricey fixes.
 
We’re sitting on the problem, at least for a few days. What would you do?

Photo by DoNotLick via Flickr