Mailbag: Are Extended Warranties on Appliances a Rip-off?

Brad wrote:

I thoroughly enjoy your website, Samurai, and find it most informative and even hilarious. I am an appliance salesman for a regional retailer based in Indiana, and I have gleaned much knowledge in the field from your website. My contribution to your beer fund is forthcoming.

I am the type of salesperson who always tries work in the best interests of the customer, yet there is one area I am somewhat ambivalent about… extended warranties. And of course, that is one area I cannot afford to be ambivalent about, what with the bosses bitching at me about my low warranty numbers.

My question is this: Knowing what you know about appliances, would you recommend a customer purchasing a new appliance also purchase an extended warranty? I know the warranties we offer (varying in term from 3 to 10 years) are a good value compared to what some of my competition offers, but I still do not know if it is truly in the customer’s best interests, or if I am aiding and abetting the fleecing of Joe Blow.

I’m so confused! I know there is a lot of junk on the market right now, and I know things are not made like they used to be. But I also know I hate pitching them, and hate it even more when the customer takes offense at what I am offering.

Suggestions? Thank you, Samurai.

The above message was sent when you were offline, via your LivePerson site.

Message sent from IP:

Howdy, Brad. Always good to hear from fellow practitioners in the arcane world of home appliances, whether it’s manufacturing, repairing, or sales.

Your impulse to work in the best interest of the customer is really the only way to do business for the long term. Your question about whether or not you’re fleecing the customer by offering extended warranties is wholly dependant upon the actual service that would (or would not) be provided in the event the customer needed to exercise that warranty. In other words, the warranty is only as good as the service to back it up.

I look at extended warranties as a type of insurance which, in reality, they are. In fact, most of the large, reputable extended warranty plans, such as Whirlpool’s Homewise plan, are underwritten by major insurance companies, such as AON Corporation. To this end, true extended warranties, backed up by real service, can be considered no more a rip-off than any other type of insurance. Is liability insurance a rip-off? You might think so as you pay the premium year after year…until someone actually sues you. Then it pays off in spades.

Is the arrangement set up for the insurance company (or extended warranty dealer) to make money? You bet it is! Could it be any other way? Businesses exist for one reason and one reason only: to make a profit. If a business can’t make a profit offering a legitimate product or service then it goes bankrupt. And who benefits from that?

Some customers are willing to pay a premium for the extra security and peace-of-mind that they derive from owning a legitimate extended warranty policy. Others are not. Your role as an appliance salesman is to offer realistic and honest choices to customers. As long as you’re doing that then you should sleep well at night and I charge you to "Go placidly amid the noise and haste…"


Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.