Is buying an extended warranty on a new appliance worth it? It can add a significant cost to often already expensive appliances.
Personally, I never take out any extended warranties. I have been talked into it occasionally in the past but I never found that I needed any of them. I now prefer to look at the bigger picture. Over a lifetime of owning all my appliances and devices it’s pretty near certain that I will pay out far less if I just pay for repairs. I don’t want to pay out year after year regardless of whether the product breaks down or not. I also don’t believe I should be so scared of breakdowns and accidents that I need to insure virtually everything I ever buy – especially when much of what is likely to happen probably won’t be covered.
Research I've read from organisations like Which? backs this view up as they’ve found that statistically, even the least reliable of appliances such as a washing machine isn't likely to break down enough to make buying the extended warranty financially viable for the average consumer.
Extended warranties are about a specific mindset, which is that products can break down so we must be protected from that. When you think about it, it’s crazy. Why? Because that same “logic” applies to virtually everything we own. My washing machine, tumble dryer, fridge, freezer, cooker, microwave, dishwasher, hob, television, dvd player and so on and so on can all break down needing expensive repairs.
So logically we should take out cover on them all? Plus our alarm systems, car, central heating, the setee, our laminate flooring and virtually everything in the house. Doing so would cost so much money we’d be penniless. Ironically if you didn’t buy cover for all these products you’d be much more likely to have the money to deal with any breakdowns.
Extended warranties have been very big business. Billions of pounds have been made selling them over the years and they became so profitable that at one time some retailers relied on them almost exclusively to make their profits. A salesman would commonly discount a product if you took out an extended warranty because they were more interested in selling the warranties than making a profit on selling the goods.
This eventually resulted in an investigation by the Office of Fair Trading. These days most consumer advice seems to have turned against extended warranties and advises against buying them. Ironically prices should be more competitive now because of the investigation and forced changes to practices. Ultimately these products can only be so profitable if the vast majority of people buying them either don’t claim or have claims rejected.
Some people may benefit from buying one
So logically you don’t take out extended warranties to save money. Here are some potentially legitimate reasons for buying one though –
- To save the stress and inconvenience of unexpected repair bills
- So that you don't have the hassle of trying to find someone to fix it*
- To cover specific appliances that you feel are so important you couldn’t bear to be unable to afford to have it repaired or to replace it
- You never have any spare money and can’t save for repairs but can afford to pay extra for the cover
So if these things are important to you then you may be happier taking an extended warranty out.
*NOTE: It can take longer to get an appliance repaired when covered under a warranty because of the way repair arrangements with third party repairers are often set up. You are a captive customer and cannot go anywhere else.
Some appliances like Hoover or Hotpoint come with a free 5 year parts guarantee. This would cover you for any major parts in the first 5 years but you still have to pay expensive labour charges. You might be satisfied with this level of cover, which can limit some of the most expensive repairs but if you aren’t careful you could end up paying expensive call out charges for minor repairs – see I have a 5 year parts guarantee – should I use it?
Extended warranties are actually a bet
At the end of the day it's a gamble, a bet. You are betting your appliance will break down enough times to leave you the winner. They, who have all the reliability statistics and repair cost data, are accepting that bet knowing the odds are well in their favour – but accepting that some punters will occasionally win.
Do less reliable appliances need an extended warranty even more?
If you buy a budget appliance, or one of the appliances feared to be less reliable such as a washer dryer, you may think it’s safer to buy an extended warranty because it’s more likely to break down. But do you really think they’d sell you a warranty without factoring that in?
Many appliances (over 5 years old) covered on extended warranties are being simply scrapped by the insurers because they are "beyond economic repair" leaving people forced to buy a new one. To be fair, they will contribute towards the cost, but depending on the age you may still need to find between 50% and 70% of the replacement cost yourself. This article explores this in more detail and is worth reading – Washing machines are expensive to repair but are extended warranties the answer?
Which? research appears to commonly find that the odds are heavily in your favour of it being cheaper to pay for repairs over the first 5 years of a washing machine's life, than to buy an extended warranty. They regularly look into the pros and cons of extended warranties and have been instrumental in getting the government to investigate miss-selling and overpricing recently. They currently have a 1 month Online Trial offer of their site where you can immediately research online and receive a copy of the Which? magazine.
Summary: If you can financially cope with unexpected bills, or even buying a new washing machine if an expensive repair occurs, then in the long run it's more likely to be cheaper to pay for any repairs as they come. But, if you aren't usually prepared to cope with unexpected bills (not a saver or just don't have the money to put aside) or you simply prefer the peace of mind, you might prefer to have the cover.
Most people won’t save any money buying an extended warranty. If they did, the extended warranty product could not exist. But some people will of course be glad they had cover at times. If concerned about repairs and how long an appliance will last you may be better spending the money on buying a better quality washing machine in the first place, or one with an extended guarantee built in.