By: Barbara Novak

  Anyone who's purchased an appliance in the past 10 years knows the drill: as soon as you agree to make the purchase, your salesperson switches gears. Now that he's persuaded you that the product is reliable enough to purchase, he starts pressuring you to buy an extended warranty (a.k.a maintenance agreement or service contract) to pay for its costly repairs. How do you respond to the sales guy's hard sell? Try telling him that one of the key trends identified in a 1993 Price-Waterhouse Study of the Canadian Consumer Electronic and Appliance Service Industry is that "improved product quality lowers requirement for repair".
 

Ten years down the line, if you've been renewing your extended warranty each year, you've probably paid more than the cost of a brand new appliance

  Any problems with your new appliance are most likely to occur during the first year, when it is still under the manufacturer's warranty or ten years down the line, when the product is beginning to wear out. By that time, if you have been renewing your extended warranty, its cost may have exceeded that of a new appliance.
  Then why would retail stores push extended warranties? Could it be that it is profitable? "Stores make a lot of money selling extended warranties," says Israel Horowitz, a Toronto based Chartered Financial Consultant, "It's a sure profit. Of course, if there's a claim, the insurance companies pay, but you can bet that the insurance companies make a profit as well. For the consumer, it's not worthwhile."
 

Would it have been more economical for the author to go to the laundromat? See accompanying story Extended Warranties: Expensive Peace of Mind

  Rena, who works in the Extended Warranty Appliance Department at The Bay in Toronto, insists otherwise. She says that the extended warranty on a standard 18-CU. FT. Beaumark refrigerator would cost about $41/year and would increase approximately 10% annually. This is "a good value," she claims, "because it covers all functional parts and labour. Camco technicians charge $50-$60 just to go out to your home for a service call. You pay over and above that for labour and parts." That's assuming, of course, that Camco does the repairs. You could always find a repairperson who charges less.
  The cost of the extended warranty on that refrigerator will continue to increase exponentially. By the 13th year you will have paid $1005.09, which would more than pay for the new 18-CU. FT. Beaumark Top-Mount Fridge advertised in the Jan 20th Bay flyer for $849.98 (and you wouldn't have to pay a cent until February 2001!). Or you could purchase the same size Kenmore refrigerator at Sears, as advertised in its January 31 flyer, for only $749.99!
  Arnon Kaplansky, a London, Ontario developer, used to purchase extended warranties when he first began developing his rental properties. Now he owns 12 apartments, each of which contains 6 appliances (washer, dryer, refrigerator, stove, dishwasher and microwave) and he doesn't have extended warranties on any of them. "Whatever broke down, it was always the only thing that wasn't covered," explains his wife, Michelle.
  Your best bet is to use your new appliance as much as possible in the first year and to have any problems, no matter how small, repaired while it is still under its manufacturer's warranty. Then put away the money that you save by declining the extended warranty and in 10 years you can use it to buy a new appliance.

Barbara Novak is an award-winning journalist, business writer and alert consumer who lives in London, Ontario.

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