If you’ve ever made a purchase at an appliance store, car dealership, or any other retailer of high-cost items, you’ve likely been offered some form of an extended warranty. An extended warranty, service agreement, or maintenance plan, is an additional contract offered by retailers meant to offset the costs of repairs on your new appliance. When you sign up for one of these plans, retailers agree to subsidize the costs of future repairs in exchange for a one-time, monthly, or annual fee.
From microwaves to refrigerators, you’ll almost always be offered an extended warranty when buying appliances for your home. Not only are these items often expensive to repair, but having a broken kitchen appliance can also seriously impede your daily life. These factors make an extended warranty seem especially attractive. That being said, it’s important to consider whether you’re truly getting the best bang for your buck. While there is no general rule of thumb, taking the following factors into consideration will ultimately help you make an educated decision about whether paying for an extended warranty is in your best interest.
Read the Fine Print
You may feel pressured to make a snap decision to purchase or pass, but we always suggest reading through the details of the extended warranty being offered. Here are a few features to look out for when reviewing your package.
First, you should understand whether your appliances will be serviced by an in-house professional or third party business. Outsourcing repairs is a common practice for major retailers. If you’d prefer to do your own research before hiring a pro, we suggest you skip the extended warranty and instead consult HomeStars to find experienced and top-rated pros in your area.
You’ll also need to ask your sales representative about the warranty’s terms of replacement. When an appliance breaks, retailers will typically offer either to repair, replace, or refund your purchase. Clarify whether your appliance will be replaced with a refurbished or brand new model as well as whether or not the company will come to pick up the broken appliance. If you’re offered a refund, ensure that it’s a full refund rather than pro-rated based on the condition of your appliance.
Finally, ask whether you will be charged if you are at fault for the issue. Often times retailers and their technicians will charge if the issue being resolved is not the result of a standard malfunction or manufacturing issue. Once all of these questions are answered, you’ll have a better idea of what you’re paying for.
Research Appliance Repair Rates and Costs
Experts also recommend weighing the cost of the warranty against how much the given appliance would cost to repair, how inconvenient the process would be, and how often an appliance is likely to malfunction. For example, on average, small appliances like microwaves and grills require service in their first year less than 5% of the time. Refrigerators and gas ranges, on the other hand, require servicing around 30% of the time in their first year. Taking the time to research these figures will help you determine whether extended coverage is really necessary on a case by case basis.
Consider Alternative Warranties
Before going ahead with a retailer’s extended warranty, you should also consider what other warranties and protections you qualify for.
Most major appliances automatically come with a manufacturer’s warranty. There are a few things to note about this kind of warranty. First and foremost, these warranties typically expire after the first few years of ownership. Similarly, the period of coverage varies from part to part. For this reason, you’ll need to keep your receipt as proof of purchase and evidence of when the transaction took place. Also of interest is the fact that not all repairs are covered – hence the term “limited warranty.” These plans often exclusively cover manufacturing defects. In some instances, given the limited terms of these agreements, it makes sense to spend on additional coverage.
Credit Card Warranty
You may also be covered under your credit card’s warranty. Should your appliance malfunction during a given period of time (typically one year), you may be eligible to file a claim to your credit card company. If approved, they will reimburse the cost of the appliance. Not all cards come with this kind of insurance so it’s important to do your research before relying on this coverage.
Evaluate Your Financial Situation
Finally, it’s important to know that when you’re purchasing an extended warranty on a home appliance, you’re often paying for convenience. These plans are rarely absolutely necessary, so if you’re not in the appropriate financial situation to invest in such a program, simply say no. Although retailers may offer an extended payment plan, if you can’t afford to pay up front it’s likely not a good financial decision. Instead of paying for the markups built into these packages, many homeowners choose to put away 20% of the appliance cost at the time of purchase to put towards repair or potential replacement.
Overall, these plans range in cost and value based on the product and retailer. As a result, it is often difficult to know when purchasing an extended warranty makes sense. However, by asking questions and doing some research, you’ll get a far better understanding of the value of the extended warranty in question. At the end of the day, keep in mind that websites like HomeStars make it easy to find reliable appliance repair pros at a moment’s notice. Have an appliance that isn’t covered? Browse appliance repair specialists now so you’re prepared when the time comes.
Cover image courtesy of Decoist.