Warranty Cost
Decide if an extended warranty is worth the price.
About Warranty Cost
An extended warranty is worth it only if its price is below the expected cost of the repairs it covers. Warranties are priced to profit the seller, so they are usually a bad bet unless you expect an unusually high failure rate.
Formula
Warranty Cost
Compare warranty price vs expected repair cost (repair x probability)
- expected repair cost
- Repair cost weighted by its probability
Worked example
With the default values below, Warranty Cost returns Expected Repair Cost of $37.50. Change any input above and every figure here is recalculated in your browser.
Inputs used
- Product price
- 800
- Warranty price
- 150
- Chance of repairaccepts 0–100 %
- 15 %
- Typical repair cost
- 250
Results
- Expected Repair Cost
- $37.50
- Warranty Share of Price
- 18.75%
- Breakeven
- Repair risk may justify coverage
Step by step
- 1Values used
- 2Warranty Cost
- 3Expected Repair Cost= 37.50
- 4Warranty Share of Price= 18.75
- 5Breakeven= Repair risk may justify coverage
Assumptions and limits
- The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
- In particular, this calculator does not take inflation, tax or compounding frequency into account.
- Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.
Frequently Asked Questions
How is Warranty Cost calculated?
Compare warranty price vs expected repair cost (repair x probability) An extended warranty is worth it only if its price is below the expected cost of the repairs it covers.
Why does Warranty Cost matter?
Warranties are priced to profit the seller, so they are usually a bad bet unless you expect an unusually high failure rate.
What values do I need to enter?
This calculator takes 4 inputs: Product price, Warranty price, Chance of repair, Typical repair cost. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.