Are Appliance Maintenance Agreements Worth the Cost?

Types

• A "Date of Purchase" warranty takes effect on the date you purchase the appliance, whereas an "Extension Plan" goes into effect on the expiration date of the original manufacturer's warranty. A "Major Component" warranty covers specific appliance components, such as a clothes dryer motor. "Replacement Plans" offer product replacement, rather than repair, and are generally geared toward lower cost items. A "Deductible Plan" covers the cost of repairs in excess of a specific deductible paid by the purchaser.

Cost

• There is generally no set amount or formula to help consumers establish the estimated cost of a home appliance maintenance agreement. In some cases, cost is calculated as a percentage of the original purchase price. Other warranties may be priced according to the length of the agreement or the selection of features such as on-site repair, express service options or telephone technical support. Some retailers will allow you to finance the cost of a maintenance agreement along with the appliance purchase price.

Value

• Determining the value of a home appliance maintenance agreement is a combination of cost-to-value analysis and personal preference. For example, the cost to replace an inexpensive appliance may be more cost-effective than spending money on a warranty. Conversely, spending a few hundred dollars to enhance warranty options for a $4,000 refrigerator could be a good value. Maintenance agreements should offer enhanced coverage, not a duplication of the manufacturer's warranty.

Considerations

• Factor maintenance agreement deductibles, administration fees and other out-of-pocket expenses into your analysis of value. Agreements that provide additional coverage such as reimbursement for spoiled food due to a refrigerator malfunction or that provide on-site repairs can offer good protection and value. Understand the effective dates of your agreement and how it interacts with the manufacturer's warranty. Most appliance service agreements are designed to be in effect during the time period when the appliance is least likely to fail. Some credit card issuers offer warranty protection for items purchased with their card; this coverage could eliminate the need to purchase a service agreement.