Last week we talked about whether a buying an extended home warranty is a smart idea. Those home warranties are offered by third party companies that will help pay for repairing, and, if necessary, replacing, covered appliances and home components, such as plumbing. Extended home warranties are usually somewhat comprehensive policies that cover more than just one appliance or house component. But this week, we’ll discuss the wisdom of getting extended appliance warranties on specific appliances, including HVAC (Heating, Ventilation, Air Conditioning) units.
Most retailers and dealers offer extended warranties, also called service plans, at the time of purchase. And some manufacturers will let you buy extended warranties within the first year of the purchase date, as long as the regular manufacturer’s warranty hasn’t expired. Let’s talk about if, and when, those extended appliance warranties are a good investment.
Many articles I read about buying extended appliance warranties expressed the opinions of home inspectors, appliance store owners and appliance repairmen. What they said about whether extended appliance warranties should be purchased by homeowners was… it depends.
Most reputable appliance manufacturers offer regular warranties that last from 3 months to up to 1 year. After that, the manufacturer claims no responsibility if the unit breaks, unless the customer purchased an extended warranty.
Owner of Mr. Rogers Appliance Repair in Tampa, Florida thinks extended warranties are a good idea for most large appliances sold today. He says “If you’re spending $800, $1,500 or $3,000 for an appliance, then it’s definitely worth getting one.”
Extended warranties vary in price and length of contract. For example, some contracts may only expand the warranty time by as little as an extra year, while other contracts extend the warranty by up to 5 years or more.
Now, don’t forget what we learned last week-- that certain credit card companies will automatically extend a manufacturer’s warranty by up to 1 year if you purchase your appliances with their credit card. And Citi credit cards will extend the manufacturer's warranty by 24 months. So, if you are purchasing appliances and fixtures with those credit cards, paying for a short one year extended appliance warranty doesn’t make much sense. You’re already getting that extra year warranty from your credit card company.
Many appliance professionals say that 20 years ago, they would never recommend extended warranties for large appliances. But now, in general, appliances are not built like they were decades ago. Today, many appliances are built for energy efficiency and cost savings, instead of durability, so they break more easily. And many residential appliances are computerized or professional grade, making replacement parts and repairs more expensive. For example, a repair call on some newer refrigerators can range from $200 to $400, so an extended warranty can pay for itself if you need just one repair call.
But sometimes extended appliance warranties are clearly not worth the extra costs. One home inspector in Cleveland, OH said that he doesn’t think extended warranties are worthwhile unless you don’t plan on getting regular maintenance on your appliances. And If you buy a washing machine for $350, it’s not worth spending $200 on an extended warranty. A good general rule of thumb that I read is if an item costs $800 or more, at least consider buying an extended warranty.
Yale Appliances, a family owned appliance retailer with its own service and repair department that’s been in business since 1923 has the following recommendations. They say the following appliances don’t need extended warranties because they don’t often need repairs: garbage disposals, microwave ovens (even drawer microwaves) and range hoods. They are all pretty simple appliances that are generally fairly reliable.
They also say dishwashers, in general, are very reliable and not expensive to fix, so they suggest skipping the extended warranty.
Yale Appliances is on the fence about whether we should get extended warranties on electric and gas ranges. Ranges are generally reliable, so you may be able to forgo the extended warranty. The only caveat here is that ranges are pretty expensive, especially professional style ranges, and for that reason an extended warranty might be a good idea.
According to Yale, you should strongly consider getting an extended warranties on all of the following appliances: washers, refrigerators and ice makers.
Washers have very expensive parts and are pricey to repair. Extra sturdy, old school washers didn’t often break down, but it’s not uncommon for newer, more energy efficient models to need repairs sometime during their life cycle.
Modern refrigerators have had to conform to tough energy standards. Unfortunately, appliances often become less durable and dependable as they become more energy efficient. According to Yale Appliances, the most reliable refrigerator with a water or ice dispenser requires service an astounding 19% of the time within the first year!
Then there are ice makers. Separate ice makers, Yale says, almost always require service within 5 years.
If you don’t get your ice maker cleaned on regular basis (and who does?), scaling from minerals in the water can cause the ice maker to malfunction. This is just one of several issues ice makers can have.
If you do decide you want an extended appliance warranty, most appliance professionals say that you should NEVER buy an extended warranty if it’s not offered either by the manufacturer or by an appliance dealer with its own affiliated service and repair department. Many retail dealers that specialize in home appliances will have their own repair department. The benefit of getting an extended warranty through the manufacturer or an appliance dealer with a repair department is they’re in the business of fixing appliances and improving their brands reputation.
Never buy a third-party extended appliance warranty, meaning a warranty with service calls and repairs not controlled by the manufacturer or appliance dealer. You’ll will often experience a ton of hassle and inconvenience. These third party companies are just middle men, call centers without the actual ability to do repairs. They usually subcontract to low rate repairmen who may or may not have experience with your appliance brand. These third party, middle men companies are not invested in your ultimate satisfaction. If, for some crazy reason, you are still tempted to buy a third party extended warranty, research the company on the Better Business Bureau website.
Alright, we’ve learned many appliance dealers, inspectors and repairmen say we should consider extended warranties for certain expensive appliances that are more likely to need repairs. But does what Consumer Reports say about extended warranties, aka service plans? Well, they say ”chances are what you spend will be money down the drain.”
I told you last week that Consumer Reports is, in general, not a fan of extended warranties-- not for appliances, or cars, or computers, or most anything. They think you should place the money that you would have spent on an extended warranty in the bank and let it accrue interest instead. Then, if an appliance breaks, you'll have the money to repair or replace it. They also recommend that you should first try your other options for repairs or replacements, such as contacting the manufacturer, retailer or your credit card company, instead of getting the extended warranty.
Consumer Reports says that retailers may push hard to get you to buy extended warranties because these warranties are profitable for retailers. Stores keep 50% or more of what they charge for these contracts. And most salespeople often get a 10% commission.
A Consumer Reports survey found that 75% of those purchasing major appliances were offered an extended warranty or service plan at checkout. Twenty percent of major appliance shoppers bought the extra coverage. The median price paid for a plan was $126 for a major appliance.
Here are some other reasons Consumer Reports is against buying extended warranties or service plans:
1. Many major problems that will occur will happen several years after you purchase the appliance, when the extended warranty is expired.
2. Buying an extended warranty may send brands a message that limiting their manufacturer warranties will increase the sale of their extended warrantees, tempting them to shorten their regular manufacturer's warranty. Consumer Reports argues that we shouldn’t have to pay extra to get manufacturers or retailers to stand behind their products.
3. Some repairs aren’t that costly. According to a recent Consumer Reports Survey, when appliances do break, the repairs, on average, cost not much more than the average cost of a service plan.
4. Manufacturers sometimes cover out-of-warranty Items with Goodwill programs. Companies sometimes quietly offer free or discounted out-of-warranty repairs or replacements for customers who complain. This is especially true if a product breaks down in an unreasonably short time, or if there’s a known problem affecting many customers. Contact the manufacturer and ask for help. If necessary, complain all the way to the corporate office and/or on the company’s social media channels.
5. Your credit card may have you covered. We’ve already learned that many credit cards automatically extend the manufacturer’s warranty on products purchased entirely with the card. And that coverage is free.
6. You may have other state warranty rights. As a result of state laws, most products automatically come with an unwritten "implied warranty of merchantability.” That means the items must function as a person reasonably would expect, be free of substantial defects, and last a reasonable amount of time. If a product doesn’t meet these requirements, you may have a right to pursue the retailer and/or manufacturer legally. An exception is allowed in some states for “as is” items. So avoid “as is” items if you want to ensure that you are protected by your state’s warranty rights.
7. The plan may let you down. Service plans typically have many fine-print exceptions that a provider can use to deny your claim. In another Consumer Reports survey of consumers who bought an extended warranty, 61% were highly satisfied with their repairs, but 19% were dissatisfied. Those who were dissatisfied said repairs took an unreasonable amount of time and it took more than one try to get it fixed right.
8. You can't afford to protect everything. Even if the plans were worth the money, it's simply not cost-effective to buy a plan to cover every major purchase.
To give you balanced commentary, I think it’s only fair that I tell you that many homeowners commenting on the Consumer Reports site said they disagree with Consumer Reports’ stance that most extended warranties are a waste of money. Many homeowners said they have been very happy with their warranties and that the extra coverage has saved them lots of money and hassle.
What can we do to at least limit the number of extended appliance warranties we buy?
Buy reliable appliances. The more dependable the product, the less likely it will be that you’ll have to fix or replace it prematurely. Who cares about a 5 or 10 year extended warranty if you have the inconvenience of having to call and schedule repairs every month? It's better to choose quality appliances above extended warranties. Research independent online reviews for appliance dependability.
Choose a retailer with a fair return policy. Some retailers, especially online retailers, say you have to deal with the manufacturer if you run into problems or defects. Those are the retailers you want to avoid.
What about HVAC systems?
A quick word about extended warranties on HVAC units. If you buy a quality system by a reputable manufacturer, it will come with a good warranty—at no extra cost. Most heating and air conditioning manufacturers cover the A/C compressor and parts on high-quality equipment for a generous 10 years, and labor for up to 2 years.
Your installer might offer an extended warranty that will add 5 to 10 years to parts or labor coverage. You can buy that extended warranty, but with quality units and regular maintenance, you are unlikely to need very many major repairs. Small problems can be fixed early when discovered during regular maintenance. Quality HVAC units will unlikely need major repairs during the term of the extended warranty. Plus, if you’re A/C breaks after the 10-year manufacturer's warranty that you automatically get for no extra charge, you might not even want to repair the unit. It could be more cost-effective by then to buy a new unit that’s more energy efficient and has newer features. So even though HVAC units are fairly expensive, you can probably skip the extended warranty. Besides, the out of pocket cost for the few repairs most reliable brands might need is typically less than what you’d pay for an extended warranty.
Finally, before we get to our quiz, here are some things to be cautious of that can void some appliance and HVAC manufactures warranties.
1. Not hiring a certified or approved contractor to install a unit or make repairs.
2. Not registering the unit or appliance and the warranty with the manufacturer in the required amount of time after purchase.
3. Not using approved replacement parts.
4. Failing to schedule required, professional maintenance.
5. Not keeping purchase receipts and service and maintenance receipts and related paperwork.
Okay, ready for a couple of quiz questions?
1. True or False. Since it’s not realistic to buy extended warranties or service plans for all of our appliances, we should strongly consider extended warranties for appliances and systems that cost $800 or more.
That’s true. It doesn’t make much sense to buy a $200 extended warranty for a $375 appliance. But the more expensive the appliance, usually the more worthwhile an extended warranty, depending on the appliance... which brings me to the next question.
2. On which of the following appliances does Yale Appliances say you can forgo an extended warranty because the appliances are pretty reliable and not too expensive to repair?
B. Range Hoods
D. Garbage disposals
E. All of the above
The answer is E all of the above. They say you can probably skip the extended warranty on the above appliances. The appliances that Yales recommends extended warranties for are refrigerators, separate ice makers, and washing machines. They are on the fence about gas and electric ranges, but the more expensive the range, the more you should consider an extended warranty.
The bottom line with this, as with most things, is that you have to do what makes financial sense and gives you peace of mind. It’s probably not the best idea to buy extended warranties on all your major appliances, but if you feel better covering a few appliances with a little extra coverage, go for it.
Please remember that the purpose of this podcast is simply to educate and inform. It is not a substitute for professional advice. The information that you hear is based the only on the opinions, research and experiences of my guests and myself. That information might be incomplete and it’s subject to change, so it may not apply to your project. In addition, building codes and requirements vary from region to region, so always consult a professional about specific recommendations for your home.
Thanks for stopping by. I hope you learned as much as I did and I hope you'll come back next week.