When you buy a large appliance for your home—a washer and dryer, a refrigerator, a water heater—the salesperson will almost always offer an extended warranty. Extended warranties, also called service plans, protect you for a period beyond the standard manufacturer's warranty. Most manufacturers' warranties last only a year, and your salesperson may warn you of the financial impact if your appliance breaks down after that time. But is an extended warranty really worth it?

Are Extended Warranties on Appliances Worth It [infographic]

Expensive Appliances

Ten or twenty years ago, most appliances were relatively simple mechanical devices. They were costly to buy, but replacement parts were usually reasonably priced. With some simple maintenance, most appliances would last a long time without any trouble. And if they did break down, they were often not that hard to repair. That's why so many consumer advocates recommended against extended warranties and service plans. The cost of repairs wasn't enough to make up for the cost of the warranty.

Today's appliances are a whole lot smarter than appliances just a decade ago. Today, most appliances are full of computer boards, sensors, and complicated wiring. If your fridge, dishwasher, washing machine, or dryer has any kind of digital readout, chances are there's a pretty expensive computer behind it. Even hidden appliances, like HVAC systems and water heaters, have gone digital.

Hi-tech appliances cost more to purchase or replace. A washer-dryer of a fridge can cost anywhere from $1,500 up to $3,000 or more. That's not chump change. And when they break down, parts can be quite expensive, too. In the past, a broken appliance might need a washer, a plug, or some other simple mechanical device to get it working again. Today's hi-tech smart appliances often need expensive electronic parts, such as computer boards, sensors, and displays.

Protecting Hi-Tech Devices

As the cost of repairing and replacing new appliances has soared, the old wisdom discouraging extended warranties has been turned on its head. Many appliance repair services recommend extended warranties for any appliance that would cost $800 or more to replace.

Extended warranties are even more important for appliances with electronic or digital components. A single part for a repair could cost $200 or $300. An average service call on a modern refrigerator can add up to $200 to $400. That means that a single repair could make up the cost of the extended warranty.

With the high cost of repairs, proper maintenance has never been more critical. Simply treating your appliances well, following manufacturers' instructions, and not overloading them can extend their lifetime and prevent unnecessary service calls.

In most cases, an appliance that is failing will give you ample warning before it completely breaks down. If your appliance is making unusual noises, vibrating, or not working as well as it used, it's time to call for service. For instance, a refrigerator that isn't staying as cool as you'd like can often be fixed more cheaply and easily than a refrigerator that has completely broken down. A dryer that doesn't seem to be drying as effectively as it used to may only require a simple fix. But if you let the problem linger, expensive parts may fail, making repairs much more costly.

When Warranties Are a Waste of Money

In some cases, you're better off keeping your money than spending it on an extended service contract.

For less expensive items, an extended warranty or service contract may be overkill. An appliance that costs you $300 or $400 is certainly not worth protecting with a $200 warranty. Not only are these units cheaper to replace, but they are also usually less expensive to repair. If an appliance is low-tech, it might not take much to fix it. You'd have a hard time making up the costs of the warranty.

Another warning sign is a salesperson who is really pushing a warranty. If you're on the fence about an extended warranty or think you don't need one, avoid the hard sell. Most salespeople make commissions on warranties, so they are not entirely impartial. They may warn you that an item could break down shortly after the manufacturer warranty expires. If something doesn't seem right about the sales tactic, feel free to walk away.

It is also essential to read the fine print on any service contract or extended warranty. It makes sense to protect expensive appliances, but don't pay for a bad deal. Make sure that the warranty actually covers the cost of parts and labor, and that you aren't required to use aftermarket parts.

Third-Party Warranties

When you buy a warranty, pay attention to who stands behind the warranty.

Manufacturer warranties are great because you know that your repairs are covered by the same company that made the appliance. They will likely use original parts and send out a skilled technician. Often, the technicians you get with a manufacturer warranty are factory-trained. They know your appliance well. A manufacturer also lends their reputation to their warranty and repairs, so they are motivated to get it right.

Third-party warranties are a little more risky and should be approached with caution. Third-party warranty companies aren't in the appliance business. They are in the insurance business. They make more money when you don't make a claim or keep claims small. They will often cut corners to save money and may have lots of red tape. Both you and your repair technician may have to wade through arduous automated phone systems to make a claim or order parts. So before you get a third-party warranty, read the fine print very, very carefully. It may not be worth the cost and trouble.

Homeowners Insurance and Appliances

It is possible that your homeowners insurance may cover some appliances, or may offer to add appliances for an extra fee. Check your homeowners insurance policy to see if any appliances are included. If they are, you may want to decline the manufacturer's extended warranty. However, if there will be an added cost to cover appliances, approach it like a third-party warranty. You may also want to talk with your insurance agent ahead of time about the process for filing a claim for appliance repair. Homeowners insurance can be challenging to navigate, even if you have the right coverage.

Finding the Right Repair Technician

If you have an appliance, large or small, that needs repairs, you need to find the right technician to fix it. Often, you don't have a lot of time. If your fridge is broken, you need to act fast before you lose all of the food stored inside. If your washing machine or dishwasher is broken, it can be very inconvenient to spend days waiting for a repair. A broken HVAC system can leave you shivering or sweating (depending on the season) while you wait for repairs. In any case, you may feel pressured to find whichever company can send out a technician the quickest.

Before you call a repair technician you found in the Yellow Pages or online, check TrustDALE. A TrustDALE certified appliance repair technician has passed Dale's 7-point investigative review process and is backed by his $10,000 Make-It-Right™ Guarantee.

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