It's a classic shopper's dilemma. No, we're not talking paper vs. plastic. How about: Do I buy the extended warranty or not?

With Black Friday behind us and Cyber Monday ahead, the holiday season is in full cash-register mode. And even in a recession-addled year, personal electronics – laptops, Blu-ray players, iPhones and Xboxes – still top many gift lists. And that's where extended warranties come into play.

Let's say you're about to plunk down $1,000 or more on a big flat-screen TV. Or you're picking up an Xbox 360 for the kids. Whether it's at the register or on the sales floor, you'll likely get asked about buying an extended warranty – also known as "protection plans" or "service contracts" – to cover repairs or replacement in case the item gets damaged or stops working.

Plenty of consumers hate the pitch. In its annual survey of holiday shoppers' pet peeves, Consumer Reports last week said 62 percent cited "being hounded" by salespeople pushing extended warranties.

Retailers have a big incentive to aggressively sell those plans.

"It's kind of the cash cow of electronics stores," said Jeff Rusinow, a Scottsdale, Ariz.-based venture capitalist and former Kohl's executive who spent 22 years in the retail industry. Because profit margins on electronics are low, he said, extended warranties "are one of the best places for them to make money. It's true of appliances, carpeting, electronics or anything else."

Extended warranties produce profits of 50 percent or more for electronics companies, according to retail consultant Britt Beemer, chairman of America's Research Group in Charleston, S.C.

But even Beemer said he often – but not always – buys the warranty. Last year, for instance, he and his wife bought a new convection microwave oven for about $800. "We had it six months and it broke," said Beemer. "It was a $6 part, but the service call would have been $179."

But because he'd purchased a three-year extended warranty, "They took care of it 100 percent." The in-home service call was free and the repairs were done within 24 hours, he said.

For Beemer, the prompt, no-hassle service was worth it. "I don't like having to pay for insurance, but if you're spending $800 or $900 and the warranty is $110, it's worth it."

Not so, says Consumer Reports, which last week again advised consumers that extended warranties are "notoriously bad deals."

Cautious consumers, it said, might consider an extended warranty for "a repair-prone brand," but should never pay more than 20 percent of the product's price.

It gets down to what you're trying to protect.

"On a $49.95 radio or an under-$100 video recorder, it's foolish because they're throw-away items," said Carlsbad-based retail consultant George Whalin.

But on complex electronics, such as a plasma TV or $900 dishwasher, an extended warranty "makes perfect sense," said Whalin. "You're not going to pull it out of your home to go get it fixed. Those service calls are costly, so it makes sense to have it."

But retailers who apply the hard sell are making a mistake, especially in today's economy, he noted.

"No American consumer wants to be pitched and sold stuff. We want to buy things that we made the decision to buy."

There are alternatives to store-purchased warranties. SquareTrade.com, a San Francisco-based Web site, offers extended warranties for less than typical retailer prices.

CEO Steve Abernethy, who says SquareTrade has sold more than a million warranties since 2005, says the company's low overhead means it can keep rates lower. For instance, SquareTrade's three-year extended warranty contract for a 40-inch Samsung LCD TV is $89. Best Buy charges $99 and it's good for only two years. On a 13-inch Apple MacBook, SquareTrade's three-year extended warranty is $149 vs. $325 for Best Buy.

Another factor to consider is the likelihood of repairs. According to Consumer Reports' most recent overall survey in 2006, the top five items requiring repairs within three years are: laptop computers, rider mowers, lawn tractors, desktop computers and side-by-side refrigerators with ice makers/water dispensers. The least likely: digital cameras and TVs with picture tubes.

If you're considering an extended warranty, here's what Consumer Reports recommends:

Check your credit card

Some credit cards provide free warranty coverage. Most often offered on gold and platinum cards, it typically lengthens the original manufacturer's warranty by as much as one year.

Ramit Sethi, a personal finance blogger and author, says, "You can generally skip the warranties when you buy electronics, like a laptop, because your credit card is automatically going to back you if it breaks, gets stolen or you spill coffee on it."

Ask the retailer

Some retailers also will extend the manufacturer's warranty at no charge. Costco, for example, extends the warranties on its TVs, electronics and computers for one to two years.

Get clear on terms

Know exactly what's covered. For bulky, heavy items such as large TVs or major appliances, ask if the extended warranty includes in-home repair or pickup. For TVs, will it be reconnected to your audio-video setup? Is there a "lemon clause" that says a product will be replaced after several repairs?

Keep in mind: An extended warranty usually begins the day you purchase a product, so it often overlaps with the standard, one-year manufacturer's warranty. That means a three-year policy typically provides only two years of additional coverage, says Consumer Reports.

Try to negotiate

Always ask for a better price on the warranty. Make sure it's never more than 20 percent of the product's overall price.

And take the approach of retail veteran Rusinow, who recently purchased a two-year warranty for a new flat-screen TV for his Scottsdale home.

"If you want peace of mind, they are worthy of consideration. … It's a personal decision. Make sure it's informed."

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Have a personal finance question? Contact The Bee's Claudia Buck at (916) 321-1968.