(Not sure if this is GQ or IMHO material - mods feel free to move it).
We’re buying a new washer, dryer, fridge, stove, dishwasher (and maybe a freezer).
Of course the store (The Brick) is pushing us to buy the extended warranties as well. It’s approximately $100 per appliance.
They have some deal where after 5 years if you don’t use the extended warranty, you receive the purchase price of the warranty back as an instore credit on furniture and/or mattresses.
(From their website: You will be entitled to a credit at any Brick Group store in an amount equal to the price paid (less taxes) for the Full Circle Protection Plan you purchased if no claims have been made on your Full Circle Protection Plan. The value of your warranty purchase may be redeemed at any Brick Group store toward your next furniture or mattress purchase and/or related accessories within 90 days after the date your Full Circle Protection Plan expires. Redemption available only after expiration of warranty period that was claim free. Credit cannot be applied to previous purchases. Redemption offer has no cash value. Unredeemed amounts will be forfeited. Redemption may not be used in combination with any other Full Circle credit.)
So we’re wondering two things - (a) should we bother with the extended warranty AT ALL on ANY of the appliances? (b) if so, if we were to get it for just SOME of the appliances, which ones traditionally have a higher chance of needing repair?
It’s hard to answer a quesiton like that 'cause you have to factor in cost, length of time and other things.
One thing to keep in mind is whether or not you are getting a warranty already.
Here’s what I mean:
Supposing I buy a computer with a 1 year warranty. The store offers me an extended 3 year warranty for $100.00. That is $33.33 a year right? Well technically but not really.
You see your three year warranty starts at time of purchase NOT when that 1 year warranty you’re already getting ends. So for an entire year you have two warranties and usually the extended warranty won’t pay out if there is another warranty already. So in effect you’re really only getting TWO years on that extension not three.
Also look to see if you can purchase an extended warranty directly from the maker of the item. You will certainly pay less, sometimes you can purchase the extended warranty for up to 50% less
I guess what I’m wondering is, with normal use, do any of these basic (not a lot of frills) appliances (LG washer & dryer, Whirlpool stove, fridge, dishwasher) really require an extended warranty or should we skip it altogether?
My guess would be if anything is going to have problems first, it would be the washer, dryer, or dishwasher, since they have moving parts …?
Or will any appliances that survive the first year (under regular warranty coverage) have a good chance of surviving the next 4 years?
I know from personal experience that washers and dryers are really easy to dignose and fix your self, with a little help from google. I imagine dishwashers are the same, but I’ve never had to fix one.
My old stove, washer, dryer, refrigerator and freezer lasted ten years without any problems. The dishwasher, which was several years old when we bought the house, crapped out after two years.
If the expected cost of repairs over the warranty period exceeded the price of the warranty the store would not be pushing you to buy the extended warranty. Ipso facto, the extended warranty is not worth the money.
It is always better to self insure on small cost items. While I realize new appliances may not seem small cost, on the grand scheme of things that can bankrupt you (which is the type of thing you should be insuring against), they of course are. Take some relatively small amount say $10 -$20/month and put it into a savings account (separate from other savings/checkings accounts so you are not tempted to touch it). If you need to get a repair done outside the warranty, the money is there. If you don’t end up needing to get a repair done, you profit versus having paid money for an extended warranty.
As an aside American Express doubles the warranty on any items you purchase using your card up to 1 year. This is extremely helpful for those things with relatively short warranties.
In my parent’s house, they’ve made use of extended warranties on everything except the dishwasher. The fridge’s ice maker broke, the glass stovetop’s surface cracked, and the microwave stopped microwaving.
FYI, in the August issue, Consumer Reports advises against purchasing extended warranties on major appliances. They reason that appliances rarely break down during the extended warranty period and when they do, the cost is about the same as the extended warranty would have cost.
My opinion is that you should set aside the $500 that the extended warranty on these appliance would have cost and use it for any needed repairs. (BTW, what happens if the store or its insurance company go out of business before you’re able to take advantage of the warranty?)
Extended warranties are big moneymakers for the store. That’s why they work so hard to recommend them.
Consumer Reports only listed two items where extended warranties were . . . warranted: Laptop computers (especially if the warranty includes accidental damage, as many do – you can fix a broken screen as part of it) and hi-def TVs (which evidently are still not 100% dependable). In general, items either break in the first 90 days or they run for years, especially appliances.
When someone offers me an extended warranty, the conversation goes like this:
“Would you like to buy an extended warranty.”
“Why? Is this such a piece of junk that it will break down that easily?”
“Uh, well, you never know.”
“Well, if the item is that cheaply made, cancel the sale. I’ll go somewhere else that doesn’t sell junk.”
You’d be surprised how quickly they change their tune.
I agree with your conclusion, but this logic is unsound. By that reasoning, all insurance (which is basically what this is) would not be worth the money. Balanced against the cost over time is the risk factor of having to pay replacement cost all at once.
Sure the expected value of the insurance is negative, but expected value is only one way to evaluate a gamble: pain of downside, utility and time value of money, and the mockery of your friends for having bought an extended warranty are others.
That said:
Laptops: yes, and consider the optional breakage, if available.
Cell phones: yes if it covers loss/accident
Refrigerators: maybe, if the cost is reasonable. Newer refrigerators seem to have a much higher breakage rate (internal and compressor) than in the past.
Everything else: no.
My favorite are the folks at Best Buy trying to sell you the $15 extended warranty on a $29 mouse: Thanks, but I can live with that risk.
My calculus professor said something wise during the first few days of class that manged to stick w/ me these past 10 years.
Mathematicians are everywhere, they’re the one’s running the show behind the curtains. When you buy a warrranty on something, there was some PhD math guy somewhere crunching numbers, working them so that the option sounds as good as possible to the consumer, while making sure the statistics always favor the house (his corporate bosses).
That was paraphrased, but I think it sums it up pretty well. The only thing’s I’d consider buying a warranty for is something that’s new and untested, maybe plasma TV’s in their first couple years for an example. If you’re getting a dishwasher/dryer/washer, those things have been around for 30+ years. They have years and years of data to develop BETTER appliances, and develop the best math-formulated warranty that will favor themselves.
It’s the new stuff that is the X factor. The company has no old data to process to build a warranty that will favor them, and 3 years down the road, a significant # of units may suddenly fail, incurring them massive losses. Yes microsoft, I’m looking at you and your Xbox 360.
I have bought all the appliances you listed, at one time or another. The only one on which I’d ever have used the extended warranty (which I did not get) was:
THE DISHWASHER.
Twice.
Actually, for one of them, it was still covered by the one-year warranty when it went kaput. Unfortunately instead of giving me a new one they “fixed” it. It now functions correctly (washes the dishes) but does so quite noisily.
So I will put up with this for a couple more years, then get another dishwasher. And NEXT time…well, instead of the extended warranty, maybe I will just spend a little more on the appliance itself.
Err… what? At work, we say something along the lines of “That item comes with a 12 month warranty or we can extend it out to 3 years for an additional $xx. Were you interested in the extended warranty?”. We go on to explain to the interested customers that the first 12 months is covered under manufacturer’s warranty and our warranty commences after that initial 12 month period has expired and lasts two years. At no time is the item “covered by two warranties”, nor do we claim we’re selling them a three year warranty - we tell them quite clearly that it’s an extension on the manufacturer’s warranty to three years in total. Sometimes it pays to pay attention to what the salesperson is actually saying: If they asked me if I wanted to buy a three year warranty, I’d sure as heck insist they clarify: does it cover me for three years beyond the initial 12 month manufacturer’s warranty or is it a two year extended warranty that brings the total period covered to three years?
Queue retail drone eye roll. People, remember: you don’t sound clever when you say this and you’re not impressing anyone but yourself. What’s wrong with a simple “No thanks”?
The products you want to be wary of are the ones they won’t offer you an extended warranty on - I had a salesman talk me out of buying a plasma TV after he told me they wouldn’t offer extended warranties on them because they are too reliable. “The hell?” I said. “Well,” he said “They know you’ll never need it because they never break down so it would be a waste of your money. That’s why they don’t offer extended warranties on plasma TVs”. “How thoughtful of them” I commented dryly. “I know!” he agreed enthusiastically. “They don’t want to see you waste your money on something you won’t need!”. We beat a hasty retreat out of that store and went to another. After going over all the features and so forth of the TV I said “Do you offer extended warranties on your plasmas?” and he said “Yes, of course! Were you interested in purchasing an extended warranty?” “No, not at all” I said. “But we’ll take the TV”.
Should you buy a warranty? Depends on the fine print. If the warranty is limited to covering repairs up to a cap (usually the original cost of the item) then it might not be worthwhile on a cheaper item. A common gripe I hear is from people who purchase an item on sale with an extended warranty only to find when it breaks down that the warranty will only cover them up to the sale price they paid, leaving them unable to exchange for an identical model because, now the sale is over, it costs more.
I know a bit about the underlying math and statistics and your prof is right, but it does not really address the question about the best decision for an individual consumer. Sure, the warranties are rigged to favor the manufacturer against all consumers, but in this set of consumers, some will win and some will lose (get the dud appliance). Whether one should go for an extended warranty also has a lot to do with one’s tolerance for the hassle of dealing with potential repairs and the associated inconveniences, not to mention the open-ended costs.
A few years ago we also replaced all of our kitchen appliances in a remodel and opted to forgo any extended warranties. The only appliance that has had a little hiccup was the frig (stopped making those nice ice cubes). But the problem was traced to its control card (lots of electronics in the newer frigs nowadays) and all it took to fix it was to power cycle it. I wouldn’t bother with any extended warranties unless you’re the kind of person who goes bonkers when something doesn’t work.
While it is true that the company has designed it’s insurance where it will save money, you’ve got to remember that that is on every customer’s purchase, not just yours. So it may actually cost you personally less money to be insured than to fix it yourself. That’s the whole point of insurance.
Hubby is an engineer, at college he was taught about the bath tube curve. If an appliance is likely to breakdown it will in the first year (when the standard guarantee is in place). After that it will probably not break down for the lifetime of the extended warranty. After that it will break down due to old age when the warranty has also finished!
We have lived by this logic(?!) for a few years and so far so good!
I have probably explained this really badly (not being an engineer) has anyone else heard of this?
“Bathtub curve” is standard engineering parlance. And you’ve described it perfectly.
back to the OP …
As others have said, *any *insurance is a money loser for the buyer, *unless *you make a claim. *If *the insurance is honest (a debatable point with many warrantee programs) you’re probably ahead once you make that claim.
So the real economic discriminator on “Should I but some insurance on X”, is “Can I afford to have X fail & replace it myself?”
I do carry collision insurance on new cars. Because if I wreck it while it’s new, it’d really sting to have to pay off the entire loan from my pocket. 2 years later I cancel the insurance because I can stand to pay off the now-smaller loan balance & still have money left over to buy a replacement.
So it’s really your tolerance for expensive surprises that determines whether you ought to insure. Insure against house fires? Sure, because you *can’t *swing building a new house after paying to clear away the wreckage while still paying the mortgage. Insure a $10 thumb drive, even for only 1 cent’s premium? Nope. Just throw it away if it quits. Becasue you *can *swing the $10 for a new one any time without pain.
Well, my initial response is “no thanks”. Sometimes that leads to further discussion by the cashier/salesperson about the necessity of purchasing the extended warranty. I find that insulting. On a few occasions I’ve walked out without completing the purchase and gone elsewhere. Mention it once, fine. Continue nagging me about it and you begin to sound like my ex-wife.
