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Are Extended Service Agreements Worth Buying?

I’ve had many discussions over the years regarding the value of buying an extended service agreement. My opinion has evolved over those same years. Once upon a time I would have rarely suggested considering adding an extended service agreement (from now on referred to as an ESA) to any purchase, regardless of whatever the product was. Now with the push for energy efficiency from the federal government, products have become so electronic control dependent in order to meet the energy efficiency criteria that almost every component of the modern appliance is controlled by an electronic circuit board. Gone are the days of electro-mechanical devices such as thermostats, timers or selector switches common in washers, dryers, dishwashers, refrigerators and cooking appliances built before 2000. It used to be that only the expensive lines of appliances used electronic controls in order to provide a wide variety of user options. Refrigerators now have modulating compressors that operate at higher and lower “speeds” in the attempt to keep the inside compartments at a very steady temperature! As a result we are finding appliances, regardless of brand, providing outrageously reduced life expectancies. Now even the least expensive units are coming equipped with control boards, thermistors, sensors, etc.
From a service stand point the diagnostic flow chart diagrams provided with the appliance by most manufacturers (some don’t provide them with the machine) that help a technician go through all the procedures to identify the problem more often than not will say something like this: After making all the previous tests replace main control board (or another critical component) … and if that doesn’t solve the problem than replace such and such a part! Some will even mention a third part of the first two did not solve the problem!
What all this means to the average customer is that your new appliance, regardless of how much you paid for it, what brand it is or how energy efficient it is, is NOT GOING TO LAST AS LONG AS YOUR OLD ONE! I’m very sorry but that is the sad truth! So I propose a simple formula to determine if you should buy and ESA or not. Any appliance that costs over $750 should probably have an ESA purchased to protect yourself against premature failure and excessive repair bills. Obviously the cost of the agreement and the length of its coverage are factors to consider but at the $750 threshold serious consideration should be made as to the validity of buying the extended coverage.
Here are a few other factors to consider before making the ESA purchase:
1. What hoops do you as the consumer have to go through in order to get the appliance serviced under the ESA? Most ESA’s are supported by companies other than the company that you purchased the appliance from. These administrative companies are called Third Party Warranty providers or TPA’s for short. The TPA’s typically require the consumer to contact them, answer a number of repair related questions, and then tell the customer that their service request will be dispatched to a service provider who will contact you in the next 24 hours to schedule a service appointment. The appointment could be scheduled days or even weeks from the day you called!
2. What is the TPA’s track record in providing timely, quality service? Many TPA’s, in trying to contain their costs negotiate with service providers that may or may not provide a level of service that you would deem acceptable, due to scheduling delays. less than professional technical personnel, long delays in getting repairs completed, etc. .
3. Who exactly is going to be the service provider? Can you get their phone # and contact information? What happens if they don’t show up on time or at all? What are your options?
4. Do they have a cash out or replacement clause in the contract and if so what factors must come into play for that option to be exercised? Most of the time you are not given a full copy of the agreement …

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