Shoppers should sidestep extended warranty offers on electronics and appliances this holiday season, advises Consumers Union, the organization that publishes the magazine Consumer Reports.

After conducting exhaustive testing, Consumers Union said most products don't malfunction or break within the extended warranty period but even when they do, repair fees normally cost about the same as the extended warranty.

Retailers offer extended warranties like an insurance policy, offering service repairs once the manufacturer's warranty expires. Some consumers like the option because they say it provides them with peace of mind.

Retailers also advise that store service contracts are worthwhile considering many manufacturers are shrinking the terms of their warranties, in some cases offering protection for 90 days, down from one year.

But Consumers Union notes that profit margins on some warranties can be as high as 50 per cent. It suggests that flat panel televisions, laptops, computers and digital cameras have fairly good track records in terms of reliability.

"Instead of buying a warranty that you're unlikely to use, you'd be better off paying to fix your computer if it breaks," the Union advised.

However, in two instances, consumers may want to consider purchasing an extended warranty, according to the Consumers Union report.

Consumers may save money with a service agreement for rear-projection microdisplay television sets, which are costly to fix and prone to repairs. Computer buyers may also want to think about agreeing to an extended warranty when purchasing an Apple computer, to extend the company's 90-day phone support program.

Smart shoppers can protect themselves by other means, however, by selecting products with a strong record of reliability. Consumers should also read through the manufacturer's warranty thoroughly to understand its conditions and limitations, including payment for parts, labour and shipping.

Consumers should also check with their credit card companies to see if their plan offers warranty coverage. Some credit companies extend the manufacturer's warranty at no additional cost.

Sales of electronics and small appliances typically boom over the winter holiday season. Retailers sold $406 million worth of digital cameras and photographic equipment in the last three months of 2004, according to Statistics Canada.

Similarly, $527 million worth of small appliances were sold in the same period of 2004, making up for 35 per cent of their annual sales.