Are extended warranties worth buying for digital cameras and other electronics products? The New York Times finds out in an article that hints that warranties are more a way for the retailer to make a substantial amount of extra cash:

“In electronics, the gross margin for merchandise - the difference between what a store pays for goods and what it sells them for - is “25 percent, give or take,” at chains like Best Buy, Circuit City and PC Richards, said Professor Alan Kane of the Columbia Business School. Extended service contracts, on the other hand, produce a gross margin of “45 percent or more,” he said. Bill Cimino, a Circuit City spokesman, said that 3.8 percent of the company’s total annual sales of $10 billion, or about $380 million, are warranty sales for third-party insurers - or protection plans, as Circuit City calls them. Mr. Cimino said he bought one himself on a television, but declined one on a humidifier.”

What do you think - do you usually buy an extended warranty, or do you think they are a complete waste of money?

Website: The New York Times - To Buy or Not to Buy: The Quandary of Warranties