When does it make sense to purchase an extended warranty?
The key to purchasing an item is its track record...how often has it required repair for other purchasers in the past? You can find repair records as a subscriber to Consumer Reports on most appliance and electronic items and brands. With technology running rampant, there are a number of high priced items with no discernable repair records at this date, and these are the items for which you may want to consider purchasing an extended warranty. Think TVs here, particularly microdisplay rear-projection TVs. Purchasers are reporting these TVs are requiring more repair in the first year than normal. For instance, the color wheel is more and more integrated into the "light engine" of these TVs and its replacement, even if only one component within has failed, can run as much as the TV itself. These TVs run on a light bulb that is supposed to last anywhere from two (not unreasonable in a year of use) to six thousand hours. This bulb retails anywhere up to $400 and you are not supposed to actually touch the bulb when replacing it. If this makes you nervous, a repairman will come out and do it for you, for about $200.
Repairs are pricey for the LCD and flat panel TVs as well. You may have to replace the fan, at a cost of over $400. A new driver board can run you up to $1,000 or even more if it is integrated into the system. And if you are concerned about image burn in these TVs, so are the product insurers...most often this is not covered in the warranty. But if you get the warranty keep in mind that it should not exceed 20% of the retail price. So if your purchase is $2400, the warranty cost should be under $480.
Only consider extended warranties if the repair costs are extremely high and if your credit card does not provide any kind of warranty. Treadmill repairs can be high, and they are most likely not going to be superseded by another model in rapid succession. However, with treadmills, most become glorified clothes hangers in your bedroom or lonely outposts in the basement. So make sure you are going to use it consistently enough to warrant one of these plans.