Extended Warranties for Appliances and Electronics

If you’re like most consumers, this is a very confusing issue, and for good reason. Every store offers its own unique version of an extended warranty. Unless you really scrutinize the terms and conditions—which are usually printed in small, light gray text on the back of the contract—you have no idea what is covered or what rights you have until something goes wrong.


You’ve done your homework and carefully researched every magazine and article you can find about Plasma TVs. After deciding on the perfect make and model, you’ve found the absolute best price in town. Excited, you race to the store and patiently wait in line while the helpful sales person rings it up. Suddenly, they look at you and ask that daunting question: “Would you like to purchase an extended warranty on this?”
What do you do?
If you’re like most consumers, this is a very confusing issue, and for good reason. Every store offers its own unique version of an extended warranty. Unless you really scrutinize the terms and conditions—which are usually printed in small, light gray text on the back of the contract—you have no idea what is covered or what rights you have until something goes wrong.
What is an Extended Warranty?
Extended warranties are basically policies you can purchase to avoid having to pay for repair or replacement, should anything go wrong. It's kind of like buying medical insurance for your purchases.
For instance, if you purchase a washer and dryer set, the manufacturer may provide a 1-year warranty on parts and labor. The store selling them, however, might offer an additional 5-year warranty on parts and labor—for an additional fee. These warranties are now being offered on everything from DVDs you play in the home theater stereo system to all major appliances. There has been a huge push in the last few years by retailers to sell these warranties, because they generate profits for stores. In fact, selling warranties has grown into a $23 billion per year industry.
How Do They Work?
If the item breaks or malfunctions during the period covered by the manufacturer’s warranty, the store usually directs you to contact the manufacturer first. If it breaks after the manufacturer’s warranty expires, the extended warranty kicks in.
The handling of repairs or replacements is different depending on the product covered. For instance, usually you have to return small items, such as toasters and coffee makers, to the store for exchange. However, large items like refrigerators or other built-in appliances, you usually need to call the store or a representative, and schedule an appointment for someone to come out and repair or replace it.
What Do They Cost?
The cost per extended warranty policy varies from store to store. Generally speaking, the cost can range from 10-25% of the original cost. However, in some cases, the cost of the warranty can equal the cost to replace the product—but this is usually only for relatively inexpensive items such as lower-end DVD players and VCRs.
NOTE: Some policies have a deductible—keep that in mind when considering an extended warranty.
Do I Really Need an Extended Warranty?
That depends on two things: What you purchase, and your level of comfort with the manufacturer’s warranty. According to Consumer Reports, most home electronics and appliances rarely break down during the first 5 years you own them, with few major exceptions. So, if you trust the brand you buy, weigh the cost of the additional warranty against the cost to repair or even replace it during this period. In many cases, repairs cost less than the warranty, and you end up saving money.
The exceptions to the rule are large screen televisions and computers. Consumer groups suggest that buying an extended warranty is a wise choice, since repairing these items can be very costly, and they tend to need repairs more frequently. According to Consumer Reports, 33-37% of new computers need to be repaired during the first 3 years of ownership.
With appliances such as dishwashers, refrigerators, stoves, and ovens, it is more of a personal choice. Sometimes it’s worth the extra money to buy the warranty for your comfort and peace of mind—you know that if anything should go wrong, it will get fixed.
The Fine Print
If you do decide to purchase the extended warranty, it’s important to know exactly what you are getting. Some important questions to ask a customer service representative—before you purchase the policy—are:
How long the warranty is Whether or not is it in addition to, or in lieu of, the manufacturer’s warranty What it covers: normal wear and tear; defective parts only; accidents Whether it covers repairs only, covers replacement, or both If replacement parts are new or refurbished Where the item is to be repaired: in-home, in-store, or sent to a third party How long repairs take Who is responsible for faulty repairs
NOTE: Confirm that the warranty says exactly what you’ve been told. There have been a lot of grievances filed with consumer groups complaining of the differences between what consumers were told when the item was purchased, and the actual services received when the product needed repair.
TIP: As part of your pre-purchase research, ask stores to send you a copy of the extended warranty policy they offer, so you can review it before making the purchase.
Being a Savvy Consumer
As noted, in purchasing smaller appliances it doesn’t usually make economic sense to purchase an extended warranty, with exceptions for large televisions and computers. For major appliances, the price of the policy is often a trade-off for peace of mind. Sometimes that peace of mind is worth the extra few dollars, but it all boils down to personal preference.
Educate yourself and do your research before making major purchases. By being prepared, the next time you’re in line and the cashier asks if you’d like an extended warranty, you know exactly what to say.
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