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Should I buy an extended warranty for my new appliances?

That’s a question our Nebraska Home Appliance customers often ask us. Our answer may surprise you: extended warranties are rarely a good use of your money. We don’t recommend buying an extended warranty on any appliance.

Here’s why: Warranty companies insure appliances only for the time they are least likely to fail. Let’s say you buy a new Samsung refrigerator and agree to a five-year extended warranty contract. During that period, your manufacturer’s warranty will often cover the entire appliance for the first year and any expensive sealed-system repairs for the full five years. Those are the most expensive repair or replacement costs — already covered without the need for an expensive supplemental policy. Also, keep in mind that the extended warranty payout doesn’t kick in until the manufacturer’s responsibility is completed.

Essentially, extended warranties cover manufacturing defects or failure of operating parts. But statistically, most manufacturing defects show up during that first year — when the manufacturer covers the repairs anyway. Failures from component fatigue and normal use are likely to show up after the fifth year, once your contract has expired. But even covered items may be excluded if the insurance company declares the failure the result of negligence or misuse on your part.

Extended warranties specifically exclude most of the parts that actually break, such as icemakers in refrigerators, shelves, door bins and bars, and many other non-mechanical components. So if they break, you pay for their repair or replacement.

These extended warranties place an unnecessary middleman between consumers and appliance servicers. The companies offering the extended coverage take the largest cut of profit and provide the least amount of value in the equation, leaving customers and servicers with the scraps. If you call for appliance repair service under an extended warranty, the service company may have to place you at a lower priority than their regular repair and maintenance customers, creating additional delay in receiving needed service. Even if the servicer has immediate availability, they may be unable to help you without the warranty company’s say-so.

For example, if a part is on backorder, many warranty companies will make a customer wait up to 30 days before even considering exchange of the unit. No matter whether parts are already on the technician’s truck or at a local warehouse, the warranty company’s policies may require the servicer to wait for identical parts to be shipped from the warranty companiy’s preferred warehouse, costing both you and the servicer time and money.

Should you EVER buy an extended warranty? If your finances are so tight that an appliance failure would devastate your budget, you might be tempted to finance a warranty as part of the appliance purchase. But given the built-in manufacturer’s warranty, the unlikelihood of catastrophic failure during the first year of service, and the limitations of extended warranty coverage, you’ll probably be better off passing on the additional coverage and saving on total financing costs.