Friday, June 10, 2011

Appliance Extended Warranties: Priceless, Worthless or Criminal?

Here is a topic that everyone has an opinion on.  Where to begin is even a controversial subject, as is a universal name for the things.  They are called Extended Warranties, Protection Plans, Maintenance Agreements and enough other terms that one gets dizzy even contemplating the category.

In seventeen years I’ve done a complete about face on the topic.  Like many of you I originally thought they were nothing more than a way for an appliance dealer to make money on a customer—guess what, they are.  Does that make them bad?  I used to think so.  I used to think it was bad to sell someone something that they couldn’t hold in their hands, it was somehow immoral, unethical or otherwise wrong to take a customer’s money, give them a piece of paper, and tell them to call me if something goes wrong and I will take care of them on it.

I’ve since seen my healthcare premiums go to $462 every two weeks, my auto insurance go to around $200 a month, and can’t recall the last time I got anything useful out of either, certainly nothing to warrant the amount of money I have to put into them.  You want to talk about criminal, unethical and immoral; take a look at $4.00 plus a gallon and get back to me when you can explain why gas prices are three and a half times higher than they were 15 years ago and the cost of crude has barely doubled.

If that wasn’t enough to make you think extended warranties are a little less evil, I’ll give you a few reasons that are more pertinent, if less entertaining.  I would wager in my career I’ve answered the phone and set up thousands of service calls.  90% of them I’d say have been out of warranty, and I hate to take those calls.  I am so happy when someone has an extended warranty and I can use it to take care of them, that I can’t even begin to express how happy that is.  The trip charge ($125) is free, the parts (on average $200 to $300) are free, and the labor, again on average an hour and a half at $125 an hour (call it $185) is free.  Now the person who spent an extra $129 on their $800 washer for an extended warranty can simply relax and have the problem fixed or replaced with nothing out of pocket.  They don’t have to tell me they lost their job and are in danger of losing their house, and don’t have money to fix it now.  I don’t have to hear how I am the biggest S.O.B. they have ever met because I need to charge them for the service call.  They love me because I can take care of their problem and make it go away.  I can do it because they invested a little extra in a warranty, and now I make it good as new or simply new.

Would I buy an extended warranty on everything, probably not.  My rule of thumb, if I can’t afford a realistic service call price on an item without saving up to cover it, buy the warranty.  What does that mean?  If I am buying a wall oven which costs $3,000 and I know to replace the control panel with trip charge, parts and labor could easily run me $1,200, buy the warranty.  If I am buying an electronic touch control cooktop which costs $1,400 but I could have a touch sensor issue that would cost me $800, buy the warranty.  If my refrigerator costs $1,900 and a new compressor would be $700 to replace, buy the warranty.  If I have a $600 dishwasher and a repair might run $300, unless the warranty covers leaks or floor damage, probably not.  If I bought a $600 microwave to build into the wall and the replacement warranty is $39, buy it every time.  You get the picture.  If the repair cost is prohibitive, you are unsure of it because it is a new technology, or it would be a pain in the…pick the appendage of your choice, to replace, buy it.

Now I know some of you out there say I just spent $10,000 on this professional range, it better not ever have a repair.  Sorry to burst your bubble, but there are mechanics to repair Mercedes, Ferraris even Rolls Royce.  Why?  Because they were made by humans and they aren’t perfect.  Nothing lasts forever, so when something has a problem you have two choices, repair or replace.  It doesn’t matter how well it was made, and it doesn’t matter how offended you are that something you just paid a huge amount of money for is broken…things break every day.  Often part of what you are paying for on a premium or high end line, isn’t for something to be repair free, you are paying for better performance when it is working, and for it to be built to last longer, provided you are willing to repair it when an issue arises.  That is it in a nutshell.  You want to know the true value of the things, I’d say over the course of my 17 years in the appliance business, the salespeople purchasing products for personal use by them about 70% of the time.  They get it.  They know the company may make money on them in the process, but they know how valuable they can be—and let me tell you they are a cynical crowd.

That’s my take…it may not be yours.  I’ve learn the same way everyone else does.  I’ve had an automotive warranty that I had $1,200 in take care of a $7,700 repair, and I’ve had three service calls in a 5 year period on a $2,200 clothes washer that totaled $843, when a $169 five year warranty would have taken care of all of them, but I chose not to do it.  I even had a $129 warranty on a four year old TV which replaced the unit I had with a unit so much better there was no comparison.  What you choose to do is up to you…just remember I’m trying to help you now.  You aren’t a customer in my store I am trying to sell something to, I am simply trying to give you the benefit of my experience and sometimes painfully gained knowledge.  I am your Appliance Adviser.

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