Don’t Worry, Be Happy: The Warranty Psychology

MANY people would not think of making a major purchase without doing research to find the best model and the lowest price. But at the checkout counter, all of that preparation often breaks down.

There, shoppers are asked to buy a product that few have investigated: the extended warranty. New research suggests that the appeal of such warranties depends not only the inability of most people to assess risk, but also on the emotional state of the buyer. The happier you are, it turns out, the more risk-averse you become, so the more likely you are to buy the protection.

You’ve undoubtedly heard the reasons for buying one:

Your product could break. You are clumsy. Or your kids are. The plan is convenient and will save you time. You’ve already saved $200 from what the product cost two months ago. It’s cheaper than a dinner out.

I overheard them all at a Best Buy in a single Sunday afternoon.

You probably can guess why the salespeople try so hard. Extended warranties are highly profitable. They tend to cost about 20 percent of the purchase price, and they can run even higher.

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