An extended warranty is a promise made by the manufacturer or retailer of electronic equipment, new appliances, and automobiles to repair and/or maintain a product for a certain period of time. The period of time here is longer than the manufacturer's warranty and is sold at an extra cost when the product is purchased. Besides the external warranty, there are extended auto warranties, extended used car warranties, and extended new car warranties.

There are two types of extended warranties: one where the manufacturer of the product extends the original warranty at an extra charge and the other where the retailer or a third party provides the extended warranty coverage for future repair costs. The first type of extended warranty is considered to be the better of the two because the extended warranty is the same as the manufacturer's warranty, and it's more likely that the company won't go out of business and leave you with a worthless piece of paper. In the second type of extended warranty, the third-party company doesn't have any affiliation with the manufacturer of the product and may abscond without any warning. Usually, extended warranties insure the product for one to five years where the consumer is expected to pay anywhere from ten percent to over thirty percent of the cost of the product.

Most people don't suggest buying extended warranties because the are not the cheapest option. Moreover, most of the extended warranties kick in immediately instead of a year after the purchase when the manufacturer's warranty expires. So the consumer ends up paying for free coverage. Electrical appliances also tend to breakdown either in the first year when the manufacturer's warranty is valid, or near the end of three or four years of the product's lifespan"way after the extended warranty period. So there is actually no point in buying an extended warranty. And most important, most of the people tend to lose their extended contracts, move, or even forget that they have an extended warranty in the first place. So the extended warranty proves useless unless the consumer has it on file and remembers it.

So to feel more confident about electronic products without buying an extended warranty buy products with a solid record of reliability to reduce the probability of a breakdown. Make sure the product has a regular manufacturer's warranty and understand it well. Using credit cards is also advisable, as many credit cards give extended warranty coverage to customers who purchase a product with their credit cards.