To Buy Or Not To Buy: Extended Warranty on Home Appliances

If you're in the market for a new appliance, you're undoubtedly going to find yourself wondering if it's worth it to purchase the extended warranty. Don't fall victim to an on-the- spot decision, plan ahead. Salespeople may make commission off of selling you a warranty on a product, but is shelling out for that extra coverage going to pay off? Well, it depends. We're here to lay out the basics for you.

What is a warranty?

When purchasing a new appliance, there is generally a basic built-in warranty that will secure your coverage for a certain amount of time following the purchase. This may cover breakdowns, broken parts, and other potential damage.  Apart from this, most appliance sellers offer extended warranties in addition to the built-in type. Before purchasing an extended warranty, be sure you know how long your built-in warranty lasts, and what is included. This is especially important when you consider that some extended warranties, such as Home Depot's 5-Year Protection Plan, start at the same time as your built-in one, so you'll have some overlap.

There are a couple of different types of warranties. Some are offered directly by the manufacturer, which is usually the best situation since there is more accountability.  The other type provides coverage through a third party. Coverage offered through a third party may require more time and effort on your part if you find yourself with a faulty appliance. It's best to stick to warranties offered by the manufacturer since they will be more knowledgeable about your product from the get-go and be able to connect you to the right services more expediently.

When is it worth it, and when is it not?

They key here is to consider the value of the appliance you're looking to purchase. For example, Lowe's offers extended warranties that vary in price based on the original cost of the product you're buying. This means that coverage on a new microwave will be far less than the extended warranty for a brand new refrigerator. Makes sense, right? However, it's difficult to know where to draw the line when deciding whether to invest in an extended warranty. A general rule is that the warranty should not cost more than 20% of the appliance. In addition to this, you may also want to adhere to the rule of only purchasing an extended warranty for products when the base price is $1,000 or more. Appliances are meant to be built to last and, most of the time, you probably don't need to splurge for an extended warranty -- especially if the duration is less than ten years.

What can you do instead?

First, find out if you have to buy the extended warranty at the same time as the appliance, some sellers will let you purchase it up until the day your built-in warranty expires.  If you consider your options and then decide that an extended warranty isn't right for this particular purchase, then there are still other things you can do to protect your investment. For starters, educate yourself on the ins and outs of your built-in warranty. This will ensure that if things do go wrong, you're prepared to handle it. The main takeaway here though is to do your research beforehand and know that you're investing in good quality products in the first place. Then make sure you keep up the recommended maintenance and use the appliance according to the manual. You can even put aside the money you might have spent on an extended warranty and create an emergency repairs fund to help you feel secure in your decision.