Thoughts about buying appliances

[Paul Anilprem]

I need to buy three things - washer, dryer, and refrigerator. The house will be rented out for the next couple of years so I think I don't need top of the line stuff. Just regular but reliable. I am thinking of the following options -

1. Buy cheapest new ones from the store along with extented warrantly - about $2000 for all three.
2. Buy cheapest new ones from the store with no extendent warranty but buy Home warranty separately - about $2500
3. Buy used appliances from craigslist + buy Home warranty separately - $1500.

What do you think would be a good option? Is there any other better option that can reduce my involvement if an appliance gives trouble to the tenant?

(This is in US, btw.)

thanks!

[Jayesh A Lalwani]

If you are buying new ones, extended warranty will most certainly be a waste. The products are designed so that statistically they are most likely to break after the extended warranty. That's how they make money. They take your money, and they are pretty sure, they won't have to replace anything. Your product will either break in few months of purchase (because of a manufacturing defect), or right after the extended warranty(because of wear and tear). It will probably not break when you need to extended warranty

[Jayesh A Lalwani]

Also, one more thing. I have 2 rental houses, and 1 house that I live in, and I've gone through this debate of how to make sure I'm prepared for breakdowns. The cheapest way to do it is budget for breakdowns and keep a breakdown fund. Don't buy insurance unless it's on a really big ticket item (like fire damage, or water damage, etc). You know your appliance is going to break down after certain years. It's easy to find out how long they will last:-- If the retailer/manufacturer is selling you warranty+extended warranty for 5 years, your appliance is going to be ready to break down at 5 years 1 month. Take the cost of the appliance, factor in inflation, divide by 5*12 = 60. This is the amount that you need to save per month. Add up all the appliances and you have how much money you need to save per month to keep your house in working order. Take that much money out of your rent cheque every month and save it in a fund. SOmething breaks, take cash out of the fund to buy the thing

IOW, run your own extended warranty. Don;t pay someone else to run your extended warranty. You know they are going to make money off you. They are running a business.

[Paul Anilprem]

Jayesh A Lalwani wrote:If you are buying new ones, extended warranty will most certainly be a waste. The products are designed so that statistically they are most likely to break after the extended warranty. That's how they make money. They take your money, and they are pretty sure, they won't have to replace anything. Your product will either break in few months of purchase (because of a manufacturing defect), or right after the extended warranty(because of wear and tear). It will probably not break when you need to extended warranty

That is true with any kind of insurance otherwise there won't be any insurance providers. The money that you are paying is to hedge your risk of something going wrong. At the same time since there is no regulation on how much profit extended warranty providers can make (unlike medical insurance), the money that you pay for hedging the risk is most probably too much.

For now, buying used stuff and coupling it with a home warranty seems to be the best option.

[Jayesh A Lalwani]

Yes, in general terms , that is true. However, extended warranties on appliances specifically are a big scam. They are designed to make money out of you without giving you a benifit. You can look at any of the consumer advice sites, or google for "Is extended warraty bad" if you don't trust me. The consensus is that you should always refuse extended warranties on appliances.

Edit: whether a used item is a good or bad idea depends on how old it is. If the have used the appliance normally, the appliance is very likely to fail right after the extended warranty would expire (if they had bought it). It's really freaky how they make it so reliable that they can even predict when it will fail. If you buy used, you need to take into account when it will fail. Generally, I don;t buy used because I don;t want to go through the hassle of purchasing stuff again and again. I bought a washer. I don;t want to think about it for the next 5 years. My time is more valuable than any saving I would get on used.

[Paul Anilprem]

Jayesh A Lalwani wrote:Yes, in general terms , that is true. However, extended warranties on appliances specifically are a big scam. They are designed to make money out of you without giving you a benifit. You can look at any of the consumer advice sites, or google for "Is extended warraty bad" if you don't trust me. The consensus is that you should always refuse extended warranties on appliances.

I agree with you.

[Frank Silbermann]

Jayesh A Lalwani wrote:If you are buying new ones, extended warranty will most certainly be a waste. The products are designed so that statistically they are most likely to break after the extended warranty. That's how they make money. They take your money, and they are pretty sure, they won't have to replace anything. Your product will either break in few months of purchase (because of a manufacturing defect), or right after the extended warranty(because of wear and tear). It will probably not break when you need to extended warranty

That's what I used to think. Lately my ovens, front-loader washing machines and laptops have broken multiple times within the extended warranty period.

I think with some products the extended warranty has become more like a software licensing fee.

[Paul Anilprem]

Jayesh A Lalwani wrote:Also, one more thing. I have 2 rental houses, and 1 house that I live in, and I've gone through this debate of how to make sure I'm prepared for breakdowns. The cheapest way to do it is budget for breakdowns and keep a breakdown fund. Don't buy insurance unless it's on a really big ticket item (like fire damage, or water damage, etc). You know your appliance is going to break down after certain years. It's easy to find out how long they will last:-- If the retailer/manufacturer is selling you warranty+extended warranty for 5 years, your appliance is going to be ready to break down at 5 years 1 month. Take the cost of the appliance, factor in inflation, divide by 5*12 = 60. This is the amount that you need to save per month. Add up all the appliances and you have how much money you need to save per month to keep your house in working order. Take that much money out of your rent cheque every month and save it in a fund. SOmething breaks, take cash out of the fund to buy the thing

IOW, run your own extended warranty. Don;t pay someone else to run your extended warranty. You know they are going to make money off you. They are running a business.

I am not sure I understand this approach correctly. The regular warranty is usually only for 1 yr. Are you suggesting to buy extended warranty and then do the calculation you've mentioned above?

My thinking is as follows -
It is not just the appliance that can go wrong. You have to consider heating/cooling, plumbing, wiring etc. as well. Yearly home warranty for $500 will take care of all that including the appliances as well. It will also take care of sending someover over to fix the stuff. So buy used stuff and let the home warranty take care of replacing it when it breaks.

What do you think?

[Jayesh A Lalwani]

Getting a home warranty is a good idea to cover big ticket items like electric and plumbing. If something really goes wrong with the plumbing, you might have a hard time coming up with the cash to pay for it. However, if you are planning to have the home warranty cover the appliances, check the differrence in price and also the deductible. when I had looked at it, it was not worth it, espescially because of high deductibles. You might get a better deal than I did

[Paul Anilprem]

Jayesh A Lalwani wrote:Getting a home warranty is a good idea to cover big ticket items like electric and plumbing. If something really goes wrong with the plumbing, you might have a hard time coming up with the cash to pay for it. However, if you are planning to have the home warranty cover the appliances, check the differrence in price and also the deductible. when I had looked at it, it was not worth it, espescially because of high deductibles. You might get a better deal than I did

http://www.hwahomewarranty.com/owners/costs/default.asp
60$ per visit. 0$ deductible.

[Jeanne Boyarsky]

I don't know about the washer/dryer, but I agree the refrigerator warranty is a waste of money on a new fridge. It is rare for a fridge to break during the extended warranty period. If it is going to break, I think it is more likely to do so right away or down the road. And you can always pay someone to look at it if it does break. I'd place the bet nothing is going to happen.

I think it is different than car/fire/etc insurance because there is a fixed downside. Suppose a fridge costs $500. Even if the fridge is completely totaled, your max cost is $500. And a repair would likely cost less than that.

[Pat Farrell]

Electric Dryer have nothing in them to break. Same with low end refrigerators. If you get ice makers, ice water, etc. then that stuff can break. Washing machines break and are expensive to fix.

Tenants tend to really tear stuff up. So be prepared to have stuff fixed, its part of the cost of having tenants.

Most extended warrantees are purely profit margin for the retailer. They don't make a lot of economic sense for the buyer. But remember, tenants tear stuff up.

[Paul Anilprem]

Pat Farrell wrote:Electric Dryer have nothing in them to break. Same with low end refrigerators. If you get ice makers, ice water, etc. then that stuff can break. Washing machines break and are expensive to fix.

Tenants tend to really tear stuff up. ... But remember, tenants tear stuff up.

Yes, that is very true. That is why now I am leaning more toward buying used stuff and buying a separate home warranty. Because as I said there are N number of things in the house that can break.

[fred rosenberger]

Pat Farrell wrote:Electric Dryer have nothing in them to break.

'
I disagree. They have motors, belts, and heating coils at least. I have personally worked on each of these issues on an electric dryer at some point in my life.

[Pat Farrell]

fred rosenberger wrote:

Pat Farrell wrote:Electric Dryer have nothing in them to break.

'
I disagree. They have motors, belts, and heating coils at least. I have personally worked on each of these issues on an electric dryer at some point in my life.

OK, I exaggerated a tiny bit. I put in the cheapest dryer I could find and used it for 30+ years raising a family, with tons of loads each week, often several loads per day. I had one idler wheel wear out.

Electric dryers have one motor, one belt, one toaster and a couple of idler wheels. The Idler wheels are about $6 from any appliance repair store. Same for the belt. I've never seen a motor break, but I supposed one could. They are cheap commodity motors. Toasters burn out ever 30 years or so, replacement takes 10 minutes and $25 worth of parts.

Electric dryers have more parts in them that can break than say a hammer.