Extended Service Plans: Why? Is My New Fridge Junk?

Brent Pittman —  07/24/2012
vintage red refrigerator

I doubt this fridge had a extended service plan

A few months ago, we moved to The Valley and found out we needed to buy a refrigerator. We were busy moving and working for a week before we finally got a fridge.–yes that was an expensive week of eating out!

We paid cash of course $585.08. It would have been cheaper, but I opted to spring an extra $85 for the automatic ice maker. We got a good deal, free delivery, and they installed the water line to boot.

Now several months have gone by and we get a packet of information from G.E. trying to get us buy an extended warranty.

Extended Service Plans: Why? Is My New Fridge Junk?

So I begin thinking “Wait, what have we done? Is my fridge a piece of junk?” I have a twinge of fear, before my brain takes over.

“No stupid, you bought a top quality refrigerator that should last 15 years.”- my brain said to my fear. “Your manufacturer’s warranty is still good for another 7 months.”

My fear now gone– my brain starts to become angry when it sees the *terrible (insert word of choice) product they are selling.

Extended Warranty Plans: Great Marketing

Here are a few lines from the pamphlet they sent. Great marketing if you can’t do math or believe your fear.

  • “Spend time with a friend. Not a repairman.”—catchy eh?
  • “You have the right to expect the very best performance from your appliance and home electronics…but life isn’t perfect.”–do you sometimes sell lemons?
  • “No hidden costs. No deductibles, No stress. Peace of mind protection!”—sounds good right?

Extended Warranty: Breaking Down the Numbers

Here is what the numbers look like.  They offer a one year plan (20% discount already included–how nice of them) for $54.36, a two year plan for $97.85, and a three year plan for 146.77.

If you remember I bought our G.E. refrigerator for $585.08. A three year plan would be 25% of the original cost we paid for the fridge.

Extended Warranty: Is it Worth the Cost?

Is an extended warranty worth it? No way! In 4 years (you have to add the manufacturers warranty) I shouldn’t have my fridge break…If there was a good chance of it breaking, Assurant Solutions would be loosing money on every repair job. Trust me, they are really good at math and know they’ll make money insuring quality products.

Paying 25% of the cost of my fridge in the first 4 years is ridiculous. If something were to happen in the first 4 years, I have an emergency fund. We got a great deal on my fridge anyway and we could easily just buy a new one if the compressor went out–a $500 cost according to their website.

Final thoughts on the offer of extended service plans:

  • They are banking on the fact that I don’t have an emergency fund to cover such expenses.
  • They are also playing on my fear that my fridge will break soon. (most products break during their first year and near the later years of their life)
  • If you read the fine print, the extended warranty doesn’t cover all parts that break.
  • My homeowners insurance covers my fridge in case of flood, fire, lightening strike, or other acts of God.
  • The company makes a ton of profits from extended warranties and extended service plans, thus a high motivation to sell.
The only time I would consider buying an extended warranty is on a piece of high dollar equipment that is tied to your livelihood. ie. camera if you’re a photographer, computer if you’re a graphic designer..etc, but even then do the math and see if its worth the expense. 

More Articles on Extended Warranties

Take Advantage of Manufacturers Warranties, but Don’t Buy Extended Warranties

5 Things to Know Before You Buy an Extended Warranty 

Never Buy Extended Warranties – Dave Ramsey

Extended Warranties: A High Priced Gamble – Consumer Reports

What are your thoughts about extended warranties? Have they paid off if you’ve bought them?

Photo Credit SnaPsi Сталкер (Creative Commons)

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Brent Pittman

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Brent is a financial coach and writer looking for the perfect donut. He believes personal finance should be both fun and accessible to anyone willing to learn.
  • MommyofZs

    All depends. Bought tv it conked out after three years. Go back to best buy buy another tv and am offered the extended service plan. Thought ‘nah’ until it was explained that had I had the service plan on my previous tv I would have gotten the purchase price of that tv toward my new one. How can they make money on this? Because people believe its too good to be true or say they’ll use emergency funds or believe the cost is too high. The 3 yr plan would have been less than a third of the price of my old tv. And remember, the total purchase price would have gone toward the new one. So I get it. Two weeks later, new tv goes out. Power surge, we freak thinking its not covered. It wasn’t covered by Sony but it was covered by best buy. SCORE!!!!!

  • http://twitter.com/barbfriedberg Barbara Friedberg

    No warranties, no time, ever. They are a way to get your $$$$$$. Even if the fridge breaks down in a few years (think about 10) it will be less than the amount of the warranty. Besides you probably already have a one year warranty with the new fridge.

    • http://www.ontargetcoach.com/ Brent Pittman

      For a fridge, definably no need. I wouldn’t go as far as never as there could be some instances where it might be useful. Did you ever get a homeowners warranty on your property?

  • http://twitter.com/seedebtrun See Debt Run

    This is worse than you think, even… Most retailers actually outsource the fulfillment of these extended warranty plans to third-party companies. So if you do purchase the plan and need to use it, you won’t deal with the retailer– but the other company instead.

    Since this company has no vested interest in what you think of the original retailer, they will typically do everything in their power to get out of fulfilling the claim. We went through an attempted extended warranty claim on a refridgerator recently and it took 20 phone calls and a corporate escalation to get them to honor PART of the costs..

    Nasty stuff..

    Jefferson

    • http://www.ontargetcoach.com/ Brent Pittman

      Wow! Sounds like you had to go to war, just to get a contract fulfilled.

  • maria@moneyprinciple

    Can’t agree more with your conclusion – extended warranties are usually not worth it; I also enjoyed the way you got there. But is your fridge really junk?

    • http://www.ontargetcoach.com/ Brent Pittman

      Nope my fridge is brand new and running great! The red fridge in the pic was just a cool vintage fridge I like.

  • krantcents

    The only extended warranty I like is the home warranty that the seller usually pays for in a sale. All others seem like a poor bet.

    • http://www.ontargetcoach.com/ Brent Pittman

      I’m going to trust you as you’re the real estate guru. I’ve heard to get the home warranty if the ac is old. Have you ever had to use a home warranty with your properties?