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Question DetailsAsked on 8/6/2013

ARE HOME APPLIANCE WARRANTIES WORTH THE COST?

We receive calls abount home appliance warranties, that will cover replacement or repair of appliances in the home, water heaters, microwave ovens, refrigerators, air conditioner units, etc. Do they really cover the cost of repair or replacement? Even central air conditioning units?

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2 Answers

1
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First, if they are calling you instead of you doing research on reputation and reviews and then calling them, that is a big red flag unless they are the compnay you bought it from (like Sears, say).

Home appliance warranties are like insurance - on the average over all their customers, they will pay out about half as much in claims as they receive, about 25% marketing and claims processing cost and administration, and about 25% profit and interest on their capital. Therefore, on the average, you will pay about twice you can expect to recoup in claims over the long run.

The other hand is that, if you have a large claim, you can avoid a large out-of-pocket cost by having a warranty. That means, unfortunately (from a social standpoint) that those who can least afford a large repair bill and therefore can benefit the most from a warranty (because they do not have cash-in-hand to pay for repairs) are also the ones who can least afford to buy a warranty in the first place because of limited income. People who are financially well off and have a significant emergency cash reserve can afford the repair costs, so do not need the warranty and will in the long term generally come out better off financially.

Now the caveat - for electronic devices, electronic controlled appliances like dishwashers and ranges and washers, and the like - repair cost can frequently come close to the cost of a new appliance, so sometimes it makes sense to buy the extended warranty from the manufacturer/distributor. I do this for ranges only (and it pays off handsomely because of the undersized wiring and switches they are using these days).

If you look at the consumer reports articles on this, other than trying to avoid electronic controlled appliances (most of which is needless use of electronics rather than elecrical or mechanical controls anyway), long-life items like reefers and freezers, washers and dryer, furnaces, and cheap items like blenders toasters microwaves and garbage disposals etc, you are better off without a warranty if you can afford or save up for the cost of an occasional repair. For major appliances that carry a lot of power or are short-lived like ranges and the more expensive dishwashers and clothes washers, it can pay off if they are electronic controlled.

If you buy the warranty from the manufacturer or a name-brand distributor like Sears, you are pretty certain you will get the needed service.

If you go with a third-party company like the ones probably calling you, you know they are making a lot of money somehow, and it is generally not by providing the best possible repair service. They are commonly difficult to get hold of (commonly normal business hours only, even for emergencies), have their call centers in Bangladesh or Costa Rica or similar, use the cheapest possible local repairmen (hence, serious work quality issues), commonly try to deny some or all the claim, commonly cover only parts not labor, or may cover part of the job but not secondary issues like water leaks, smoke damage, damaged food etc.

If you google the subject looking for "home repair warranty complaints" you will see there are a LOT of very unhappy customers out there. Personally, I have seen only one sort-of satisfied home or appliance warranty customer using a third-party warranty company - she got several items repaired in the first year after moving into a new home, but it was a fight every time with them on getting a repairman out and then getting the repair approved, and she was not going to give in - after 4-6 calls she was able to browbeat them into honoring the warranty - most people would not have been so persistent. Every other nieghbor I know with an apiance or home warranty (most of whom inherited the warranty attached to a new home purchase) eventually just gave up even calling for repairs, either because of the hassle or because the repairmen caused more damage than they repaired.

Air conditioners are sort of a special case - if I needed one, I suspect I would find a long-time local service company I liked whose owner also works in the field, then but into their service plan for routine sevice and repairs and labor not covered by warranty.

Answered 6 years ago by LCD

0
Votes

The only thing I'd add to the above answer is that major appliance manufacturers now seem to be taking on a more high-end marketing approach and sales of high-end appliances has increased dramatically. For example, you can easily pay over $1,600 for a washer-dryer pair (I just did). And the cost of repairing these high-tech models is reflected in their complexity. It too has sky-rocketed.


For these appliances, particularly washers and dryers which have LOTS of moving parts, I think an extended warranty could well be worth the cost. I bought a 5-year warranty from SquareTrade for about $400 for the pair. I hope I never have to use it, but if I do, I suspect that one or two repairs will pay for the cost of the warranty and five years is a LONG time in washer/dryer years.


The caveat with the majority of extended warranties is that a 2-year warranty on a new appliance is really a one-year extended warranty, since they include the first year in the warranty period and most major appliances have a one-year manufacturer's warranty without additional cost. Call the warranty company during the first year of ownership and they'll refer you directly to the manufacturer for service. I think, at a minimum, it's misleading advertising, but just about all major third-party warranty service contracts contain this language. Before buying ANY service contract, read the details of what it does and does not cover and how to obtain warranty service is something does go wrong with your new appliance.

Answered 5 years ago by davidpsr




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