Column: Are extended warranties worth it? Not so much, experts say

Consumers generally don’t need extended warranties.

“They are cash cows for retailers,” said Linda Sherry, a spokeswoman for the advocacy group Consumer Action. “Salespeople get commissions, which is why they push them so hard.”

But that doesn’t mean you want to dismiss the idea of purchasing extra protection in all cases.

A tipster working in the eyewear industry contacted me the other day to warn that the $35 extended warranties sold by LensCrafters, Target Optical, Pearle Vision and other chains owned by glasses behemoth EssilorLuxottica are a waste of money.

“The breakage warranties that are being sold to patients of stores owned by Luxottica are a huge rip-off,” the tipster said. “Every eyewear lab offers one free remake to the stores. Therefore, the $35 being charged to patients is simply money in Luxottica’s corporate pocket.”

That’s not the whole story, though.

I contacted a half-dozen optical labs throughout Southern California, and each said they stand behind their lenses for at least a year, often two. So if a coating starts peeling off within a few months, most labs will fix it free of charge.

Moreover, Jane Lehman, a Luxottica spokeswoman, acknowledged that frames sold by the company’s eyewear chains automatically come with a two-year limited warranty covering “manufacturer defects,” which means if there’s anything wrong, they’ll get fixed or replaced.

So what do you get for that extra $35?

A Luxottica rep explained to me that the company’s 12-month extended warranties cover normal wear and tear for frames and lenses, not just manufacturers’ defects. So if your lenses get all scratched, the added coverage should cover replacement.

What about if people sit on their glasses and break them?

“That’s covered too,” the rep said.

A pair of designer glasses can run hundreds of dollars. Thirty-five bucks isn’t a bad deal for the peace of mind that comes with knowing you’re covered if you accidentally squash them.

But here’s where it pays to read the fine print — as consumers should do for all extended warranties.

In LensCrafters’ case, the added coverage costs $35 a year, yet you still have to shell out a “copay” of $25 to replace broken frames and another $25 for problematical lenses.

That’s potentially $85 in replacement costs, not $35. You can get a new pair of glasses online for less than that.

Also, LensCrafters has lot of exclusions, including “damage from abuse,” “failure to follow the manufacturers’ clean and care instructions,” and damage caused by “fire, collision, vandalism, theft, etc.”

That potentially lets the company off the hook for all manner of breakage, as do exemptions for “damage incurred during transportation,” damage related to “preventative maintenance,” and that majestic catch-all found in many lists of coverage exclusions, “acts of God.”

Also, what should people make of LensCrafters’ exception for “any and all pre-existing conditions” prior to coverage taking effect? Isn’t that, basically, every possible defect?

Luxottica’s Lehman said that “exclusions and other details of the coverage are set forth in the terms and conditions for the plans.”

The best rule of thumb when it comes to insurance — and that’s what an extended warranty is — is whether the coverage helps you sleep at night.

If you rest easier knowing you’re protected from the unexpected, insurance is a good investment. For example, I don’t buy new cars. Rapid depreciation, and the inevitability of dings and dents (and worse), make a certified pre-owned vehicle a smarter bet by my reckoning.

That said, I generally enhance the dealer’s coverage with added protection to cover a greater variety of mechanical mishaps for a longer period of time. It’s not that I expect every car I buy to be a lemon. I just sleep better knowing I won’t get into trouble down the road.

I also see an argument for added protection for smartphones. Let’s be honest, these suckers get dropped a lot. If you’re particularly prone to butter fingers, probably not a bad idea to prepare for the worst.

On the other hand, I advise most people to skip extended warranties for big-ticket purchases such as high-definition TVs and kitchen appliances. In most cases, the manufacturer’s warranty will cover at least the first year of ownership, and if there’s a defect, you’ll probably find out about it sooner rather than later.

“Extended warranties are generally a bad value,” said Jack Gillis, executive director of the Consumer Federation of America. “Rarely do they pay off.”

He added: “That’s the main reason why consumers are highly pressured into buying them, because they are so profitable for the sellers — profitable because, on the average, very little is paid back to consumers.”

Researchers at Northwestern University and the University of Pennsylvania concluded in a 2018 study that consumers overestimate the frequency with which things break — and that retailers exploit this concern by aggressively pushing unneeded coverage.

The researchers determined that an extended warranty for an electronic product such as a TV can cost as much as 24% of the list price. And consumers purchased an extended warranty for electronics at least 20% of the time.

But here’s the thing: The researchers found after analyzing roughly 45,000 purchases over a six-year span that TVs failed only 5% to 8% of the time during the period reviewed. Which is to say, more than 90% of TVs had no problem at all.

The researchers concluded that all the extra cash from extended warranties boosted profit margins of TV retailers by as much as 73%.

Remember: Heavy-duty electronics are covered by a manufacturer’s warranty. So even if you bought a dud, you’re almost certainly protected, at least for the first year.

Pro tip: Check with your credit-card issuer. Some cards include extra warranty coverage for purchases at no additional cost.

As for glasses, I recommend doing what I do — not sitting on them.