Are Appliance Extended Warranties Worth the Cost?

Your refrigerator's ice maker leaks all over the floor on a hot summer day.

No problem.

You bought the extended warranty.

It's all covered.

After all, the point of extending a warranty is coverage for situations like this.

You call your appliance store, which tells you to call a 1-800 number.

After being on hold for 19 minutes, you feel the warranty will not help you fix your refrigerator (or any other appliance).

The process starts with you being frustrated, and either ends with you giving up or putting up with a miserable experience.

This story could be about the washer that won't work with a houseful of kids or the malfunctioning range before a holiday.

In this article, you will learn why extended appliance warranties don't always work.

Then, you will learn the one case where you might want to buy an extended warranty. I know it's a lot to consider, but you should know all your options before buying a warranty.

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My Experience With Appliance Service, 1986-2024

Yale did not have a service department when I started in 1986.

We used the independent service agents as best we could. Part of my job was advocating (begging) these companies to service our customers' appliances.

As we grew, the existing service agents couldn't and/or wouldn't (for reasons you will learn about later) handle our customers.

At the same time, new professional products from brands like Viking, Dynasty, and Wolf needed a higher level of expertise from a service technician.

If we were to be successful in the long term, we had to control the service experience.

So, almost 35 years ago, we entered the service business, and it is, without a doubt, the hardest department to manage.

Service is also the biggest part of the company by far, with almost 80 people.

Yes, providing service may result in financial loss, but it is also the best marketing strategy, especially with high-end builders and clients.

The Problem with Appliance Service

Last year, we logged over 37,000 service calls in Boston, showing a high demand for service.

This demand becomes even more apparent when considering that there was a 10% increase in service calls alongside a 9% decrease in shipments during the same period.

Moreover, these service calls were only for people who bought an appliance from us.

We cannot handle appliances bought elsewhere.

We expect this situation to be direr as manufacturers have new suppliers to fix their broken supply chains.

Read on. It gets a bit grimmer in the following two paragraphs.

What Is an Extended Appliance Warranty?

An extended warranty protects you from appliance problems.

Like any insurance, you pay upfront during the sale to save later with more expensive service calls.

Extended warranties are typically available for periods of three or five years. However, the first year is often included at no extra charge.

Therefore, when you purchase an extended warranty, you are actually paying for the second and third years in a three-year plan, or the second through fifth years in a five-year plan.

An extended warranty could be a good deal on pro ranges and refrigerators as they need repairs more often.

How Much Are You Paying for an Extended Appliance Warranty?

Shopping for a warranty is harder to shop for than an actual appliance. We shopped at several internet dealers and box stores for warranties by category.

Below is how much you would pay for a warranty based on the value of your appliance:

Interestingly, none of the four appliance dealers employ a single technician to fix your appliances.

I am unsure how Lowe's and Home Depot manage their five-year warranty (if you have experience with either, then please leave your experience in the comments below).

However, appliance stores without service sell the warranty to a third party. The third-party company is responsible for fixing your appliance.

Yale Appliance Extended Warranty Prices

Here is a breakdown of Yale's extended warranty prices for comparison:

Please note, if you buy the extended warranty after your appliance is delivered, you will not be eligible to receive a 50% credit if you do not use the warranty.

Costco

Many people have mentioned how inexpensive Costco warranties are. They even have/had a free two-year warranty.

Costco is a smart retailer, but like the others, it does not operate its own service department.

So, the warranty is cheap until you have use it.

We would do the same if we didn't have to fix the issues.

The next paragraph will show why you could spend hours pleading to fix your stove or any appliance as quickly as possible.

Why Is Appliance Warranty Service So Bad?

Appliances are different from the car industry, yet you probably see similarities.

For instance, if you have a high-quality car, your car dealership likely has an impressive service department.

They might have even offered you a tour of this department before you purchased your car.

Contrast this with the appliance industry: when did an appliance dealer last show you their service department or warehouse?

Fewer than 5% of all appliance stores have a service department.

Here's ours, by the way:

How an Appliance Service Contract Is Handled

When you purchase a service contract or extended warranty, your warranty and personal information are sold to a third-party insurance company.

It is incredibly cheap for a dealer to buy an extended warranty. A $99 service contract costs between $25-$30 last time I checked.

Your appliance store will not directly handle your service issues.

However, if you need service during your extended warranty, you will encounter many problems. Here are a few:

Challenges of Using Appliance Service Contracts

1. Appliance Service Technicians

I remember being at a service conference in 2003.

The concern back then was the average age of a service technician was 53.

Twenty years later, we continue to actively recruit new technicians. We have two dedicated staff recruiters focusing solely on finding new service technicians.

We have a six-month training period in our training center with a senior technician.

Then, they spend another three months on the road with a limited number of calls monitored by other senior technicians.

It's a three-year process.

Service is the hardest part of the appliance business; only 5% of stores have an actual service department.

These third-party call centers will have difficulty finding people to fix your appliance, just like I did 35 years ago, especially on the higher-end, more technical brands.

2. Parts

Supply chain issues have worsened an already bad situation. It is tougher finding parts now, in general, than pre-pandemic.

I suspect most are being used to ship new appliances.

3. Profit

Fixing a professional range out of warranty costs about $700 for us to diagnose the problem, order the part, and then send the technician to fix it.

Any legitimate service agent needs workman comp, auto, and general liability for damages, plus vans, parts, warehousing, and dedicated managers.

It's expensive to be in the service business.

How can an insurance company pay high claims on such low premiums and share the profit with your dealer?

They can't afford to fix your stove properly at such cheap rates.

How can they?

You need an experienced service technician and good compensation for a team of agents, parts personnel, and supervisors.

4. No Real Responsibility

The technician who finally shows up has no connection to you or your purchase.

You didn't buy it from them, so it doesn't matter.

You didn't buy the warranty from the appliance store either because they only sold your information to the call center handling the claim.

The store pocketed the proceeds, but they don't own the warranty.

The appliance warranty company will hide behind the many provisions on the terms and agreements page.

Then again, they never would have sold you THAT appliance.

So, what do you do?

Read More: Why Your New Appliance Will Not Be Repaired

Which Appliances Should You Buy an Extended Warranty For?

First, let's look at the appliance categories that have repair rates higher than the average of 8.3%

These service rates are based on over 37,000 service calls logged from January 1, 2023 to December 31, 2023.

Refrigeration and professional ranges are the most repaired appliances.

Refrigeration has a service rate of 13.5% during the manufacturer's one-year warranty period.

Most of their issues were due to water and ice dispensers.

Professional ranges have a service rate of over 15%, depending on the size, fuel type, and features.

Front load washers have a low service rate of 5.6% but are incredibly expensive to fix.

Regular ranges, hoods, and grills are the most reliable.

Read More: Most Reliable Appliance Brands

Who Do You Buy an Extended Warranty From?

The answer is simple enough.

Buy the warranty from an agency with an entire service department, whether a dealer or a service-only agency.

They sold you the warranty and have the resources to fix the issues.

You must ensure they don't sell the warranty to a third party, who will find the cheapest service available.

Many do sell to third parties, as strange as that may seem.

You call when there is an issue, and they have the technicians available.

Google reviews service providers in your area.

The following are good self-servicing dealers in Massachusetts. All are our direct competitors.

Belchers in Framingham, Hunter in Littleton, Poirier in Norwood and Newton, Doyon's in Reading, and George Washington TOMA in Weymouth are service first, sales second types of places.

Read More: Should You Buy a Third-party Appliance Warranty?

Self-Insured vs. Not Self-Insured Service Dealers

You should know the difference between the two options.

Self-insured companies can respond to a service call immediately and swap out a product if needed.

Service companies who decide to buy a third-party warranty will still need authorization from the same third-party companies.

If their rates are too high, you may have the same experience as outlined above.

Most companies do not self-insure because they must keep reserves against the warranty.

You should ask before you buy.

Our Current Stance on Warranties

Warranties are presented but never pushed at Yale.

We service the manufacturer's warranty free within one year.

We respect your decision to buy insurance or not.

It makes sense for some products because your appliance will most likely need a repair within the first five years.

Typically, an extended warranty is less expensive than a service call.

Read More: What Appliance Brands Have the Best Warranties?

Are Appliance Extended Warranties Worth the Cost?

In most cases, you should not buy a warranty because most don't provide adequate coverage.

You are better off taking your chances and saving money, especially on the more reliable appliances.

Service percentages for every appliance will probably rise with new parts being incorporated into many products.

You should only buy a warranty after vetting reputable service agencies.

As we often say in this blog, check and verify before you buy. Check review sites like Google, Yelp, and Better Business Bureau.

You want to understand how you will be treated after buying any product or service, especially an extended warranty.

People often make the mistake of just checking the product prices.

You should check the product and all the complementary services, including delivery and installation.

Generally, you will find the best service with companies with their service departments and technicians, not with third-party call centers.

If you can't find a good service agency, you are better off taking your chances.

Have any good or bad experiences with extended warranties or services? Leave them in the comments below.

Additional Resources

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