The true cost of an extended warranty
At the checkout you get a price and about ten seconds to decide. An extended warranty is a bet that the product will break, so this sets the price of the plan against the repair bills it is likely to save, and tells you how likely a breakdown has to be before the plan pays for itself. The starting figures describe a plan on a kitchen appliance. Replace them with the offer in front of you.
The true cost of an extended warranty
A 3-year plan on a $1,200 product
$200
- Price of the plan
- $200
- Claim fees you’d still pay
- $0
- Repair bills to expect without it
- $50
- Chance needed to break even
- 80%
On average, skipping the plan costs $150 less.
The plan only pays for itself if the chance of a covered breakdown is above 80%. You entered 20%.
Year by year
What you can expect to have spent by the end of each year, with the plan and without it. Without the plan, nothing is spent while the maker’s warranty is still running.
Show the figures for every year
| Year | With the plan, this year | Without, this year | With the plan, total so far | Without, total so far |
|---|---|---|---|---|
| 1 | $200 | $0 | $200 | $0 |
| 2 | $0 | $25 | $200 | $25 |
| 3 | $0 | $25 | $200 | $50 |
How this is worked out
With the plan
You pay the price of the plan whatever happens. If the plan charges a fee per claim, the calculator adds the fee multiplied by the chance you would ever make a claim.
Without the plan
You pay for a repair only if the product breaks. The calculator multiplies the typical repair bill by the chance of a breakdown to get the bill you can expect on average. A repair is never counted as costing more than the product itself, because at that point you would replace it.
The chance needed to break even
This is the price of the plan divided by what one repair would save you. If the plan costs$200 and a repair costs $250, the plan only comes out ahead if a breakdown is more than 80% likely. Compare that figure with how reliable you believe the product is. It is the most useful number on the label.
The maker’s warranty
Plans are usually counted from the day of purchase, so the first year or more overlaps cover you already have for free. Only breakdowns after the maker’s warranty ends count in the plan’s favour. If the plan ends before the maker’s warranty does, it is worth nothing.
What is not counted
- More than one breakdown during the plan.
- Accidental damage. Some plans cover drops and spills, which a maker’s warranty never does. If yours does, include accidents in the chance you enter.
- Cover you may already have: some credit cards add a year to the maker’s warranty, and home insurance can cover some damage.
- Claims that are refused. Plans exclude wear, misuse and many common faults.
- The interest the money could earn, which is small over a few years.
When a plan does make sense
An average is not the whole story. Insurance is for bills you could not absorb. If a sudden$250 repair would mean debt or going without, paying a known amount up front can be the right call even when the average says otherwise. A plan also looks better when the product is known to be unreliable, when repairs cost a large share of the purchase price, or when accidents are likely and covered.
Where the starting figures come from
There is very little public data on how often products break, and almost none that is recent. The figures below are the best we found. Treat them as a guide, and use what you know about the product.
Chance of a breakdown. Consumer Reports’ 2018 member surveys found that 15% to 40% of major appliances develop a problem or break within five years, depending on the type, as reported by ABC7 News. A three-year plan covers fewer years than that, and the first of them overlaps the maker’s warranty, so the calculator’s 20% is kind to the plan.
Repair bill. Thumbtack, a marketplace for home services, put the average refrigerator repair at $250 in March 2026, with washers at $224, dishwashers at $220 and dryers at $170.
Product and plan prices. The $1,200 product and $200plan are our example, not an average. Use the prices you were quoted.
What a large survey of car warranties found
The same arithmetic applies to extended warranties on cars, where the sums are larger. In a Consumer Reports survey of more than 12,000 subscribers who had bought one, carried out in late 2013, 55% had never used it for a repair. The median price paid was just over $1,200. Among those who did use it, the median saving on repairs was $837. The survey covered cars from model years 2006 to 2010, so it is old, but we have not found a larger one since.