Saying no to extended warranties

Author and radio talk show host Dave Ramsey.

Dear Dave,

I recently traded in my old truck for a much newer one. I purchased an extended warranty at the time, and now I feel like I was pressured into buying it and that it was a mistake. What do you think?


Dear Laura,

Cancel it, if you still can. The reason you felt pressured is because you probably were pressured by a pushy salesman. Seventy-five percent of what you paid for that plan went straight into the dealership's or salesman's pocket as commission. There's even a chance they made more off the extended warranty than the sale of the truck!

Extended warranties are only about 12 percent actual, statistical risk. The other 12 to 13 percent goes to miscellaneous overhead and profit. On top of that, the company that wrote the warranty probably didn't make as much on it as the dealership did. It's weird, but that's how a lot of those models work.

I don't buy extended warranties, Tara. In my mind, they're just crap. Besides, if you buy something and can't afford to fix it if something goes wrong, then you couldn't really afford the purchase in the first place!


Dave Ramsey is America's trusted voice on money and business. He's authored four New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover and EntreLeadership. His newest book, written with his daughter Rachel Cruze, is titled Smart Money Smart Kids. It will be released April 22nd. The Dave Ramsey Show is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at