Insurance write off, exchange... we explain why appliances usually are not worth what owners think
Working in the appliance service business we often get people demanding new machines or a full refund when the old one breaks and, very often when this happens, what many people ask for is completely unrealistic and unreasonable.
We see this a lot where appliances are on extended warranties, service plans and some long manufacturer warranties where the cost of repair is excessive, parts are no longer available and such circumstances and people get very confused about it all.
A lot of people think that, irrespective of the cost to the manufacturer or retailer, that they will simply cave in to the demands and give the person what they want or that there is some protection in law to say that they will be given a brand new replacement machine. The truth is, there really isn't and there is not an automatic right to a replacement appliance.
There are of course different ways to look at this but we're going to draw some direct comparisons to other industries as well as looking at our own to demonstrate what the real situation is with "new for old" and try to help people understand that chasing a free replacement appliance is akin to trying to find a pot of gold at the end of the rainbow at times.
New For Old Warranties
The reality is that very, very few manufacturers will offer an unconditional new for old policy of replacement in their warranty.
What you will see is that, whilst under the manufacturer warranty that they will "repair or replace" as they see fit or judge to be the best course of action. This is not a decision of the owner, but the manufacturer who's warranty it is after all.
In practice this is usually a case of the cheapest solution available unless there is a very serious or unresolvable issue by any other means.
That said, most manufacturers when they are forced to offer a replacement within the initial warranty period will offer a replacement or a dealer credit so that the retailer can replace the appliance. Remember, your contract is with the retailer and it is their responsibility to replace the product and not the manufacturer where the appliance was bought from a retailer.
However there is nothing to prevent any manufacturer from offering an equivalent replacement product which may differ in specification slightly or may not even be brand new. So long as the replacement is a "reasonable" substitute or the current best equivalent available then that would normally be considered to be reasonable.
You can of course get a new for old policy over and above the manufacturer warranty but, they tend to be expensive from the likes of Domestic & General or Currys Whatever Happens type warranties. But look at the cost involved, it can run to more than the cost of a replacement machine over the course of the cover. And, look at the cost even when you take a four year additional cover from any company that offers this, it will probably be at least 30% of the cost of the actual machine.
The reason that it is so expensive is that the actual profit in the products, because it is such a competitive market, is minimal and doesn't offer enough margin to provide that level of cover under the warranty and you can find out why in this article. Then you have the actual cost to replace the machine as well as the cost to look at it and find out that it couldn't be repaired, those added together often more than exceed the cost price of a replacement alone.
So yes, you can get that sort of protection but, it comes at a cost.
Just look at the car industry as a parallel.
If for some reason your car cannot be repaired after a year or two does the car manufacturer or insurer give you a new one?
Of course they don't. You might get new for old cover in the first year but, that's at best. In most cases the best you will get is a "free" tow to the nearest garage which is, in reality, simply added into the cost.
What you will get is a settlement based on the current market value of an equivalent model, roughly the same specification, roughly the same mileage. Everyone accepts that this is the norm and is reasonable, it may not suit everyone but it is the accepted practice.
Just like a new car that drops massively in value as soon as you drive away from the showroom, appliances also drop in value as soon as you unpack them.
What Is A Used Appliance Worth
The short answer, hugely less than most people think.
Like cars, IT, clothing, furniture and almost all other consumer goods appliances devalue over time. The value of them does not increase and the value does not stay static. What your appliances are worth will decrease the longer that you own them.
When the trade buys in what we call "raw" appliances, which is defined as returned used machines from the field then they are valued at between £10 and £15 for run of the mill returns per appliance. At best.
Where they are warranty returns, i.e. current models returned under the manufacturer's warranty, you may get up to about £50 per appliance in some cases but they would almost certainly be less than a year old. More often though, even warranty returns that require reworking, testing and so on will not attract that sort of value when sold to trade. To demonstrate this we will let you in on a little trade secret, because of the regulations on electrical waste now in force returned appliances are worth more in scrap than they are in reworks. You can find a notice to the trade on this here that we had to publish because traders ask us all the time for what they call "raw appliances".
Now, if the value of products even in warranty are greater as scrap metal and materials than they are as a sell-able item, what does that say about the value of the products merrily working away in your kitchen?
If you go looking on Ebay, Gumtree or other secondhand sites for used appliances you will see very few other than commercially reworked machines, top end or nearly new machines for any real value.
When researching this article we did go looking and, once you strip out the reworks, nearly new and the top end washing machines for example from the likes of Miele, ISE and such you struggle to find many that are being sold for more than £100.
In addition, almost without exception, they are for collection only as well so you have to cover that cost too.
Even almost new washing machines can be found for less than £100.
Below is a chart that gives you a very rough guide to what an appliance is worth over a five year period. Beyond five years the values are so low as to be regarded as more or less insignificant. Each year column is "up to" that age, so it for example you are looking at the 2 year column that would be the percentage of retail value that appliance is worth between one and two years old generally when sold privately. If you are selling to a trader, expect to get less. These figures are erring on the side of caution and are probably quite optimistic so higher than they may be in real life.
Before you calculate however, do remember to deduct the VAT element from the new value which, at the time of writing, was a 20% deduction before you begin.
|Appliance||1 years||2years||3 years||4 years||5 years|
If you graph this out and include trade prices you end up with a chart that look like this:
What you see for each product is the green line showing the value (roughly) of the product in retail terms up to one year old but that has been installed. Yellow up to two years old and so on.
In each product the second set of lines shows the approximate trade value of each as well and, as you can see, this is considerably lower. Just as with cars and so on, the trade values are substantially less than the retail will be. The upshot of this being that depreciation on appliances is or, certainly is in most cases, brutal with second hand products worth massively less than the new price, even after a very short time.
Do keep in mind however that, due to changes in waste legislation in respect to taking away old appliances commercially, that disposal is a factor and a cost that would have to be factored in and, in recent experience this makes the cost of an appliance over a year or two old effectively zero.
The value that people often place on the product is the cost it would be to buy another but, very importantly, this is not what the product will actually be worth in reality and it is unreasonable to expect to get the full value back in most cases.
There are many reasons that second hand appliances are worth so little money and we detail many of the reasons in this article about second hand washing machines
If you are lucky enough to get any more or, in many cases even close to these values, you're doing really well as we've been optomistic on what the products are worth assuming known brand names with spares available and so on. For brands that there's no support or spares for, you may as well say that they have no value at all.
Shipping And Other Charges
So, to a manufacturer or a warranty company the value of the machine that you have is probably zero or less than than zero to be accurate, they actually cost manufacturers money to recover and dispose of, be that to trade or in a "seconds" store or suchlike.
Many manufacturers place the real cost of a replacement product, where they have to do it directly, at about £200 (industry sources 2012) on average before the cost of the actual product itself and that does not include the base cost of the original product either although that should be covered in the original sale. In other words, exchanging appliances is an extremely expensive business and one that is an absolute last resort.
The reason being that, in order to ship a machine it costs about £35 just to deliver it at best. To have it returned to a warehouse costs the same. Then you have to pay for storage, disposal or you sell it off for £10-15. In reality this means a minimum loss of £55 before we even look at the cost to get to that point, the administration of it and the cost of a replacement product.
Consider that in most cases the warranty company or manufacturer has had to either pay for or cover the cost of an engineer's inspection in the first place to determine what the problem is as well. That doesn't happen for free, nothing does.
Then they have to pay a transport company.
In some cases they will need to pay for installation and, where it is an integrated appliance, that cost can be much greater.
Then they have the costs mentioned on storage or disposal.
Is it any wonder that to get this new for old cover on an appliance is so expensive?
Recession And Concession
A normal practice within the trade where an appliance is deemed to be beyond economical repair, not worth repairing or where spare parts are no longer available is to make the offer of a settlement based on the circumstances or a concessionary sale taking into account what is known as recession.
What this means is that the company you are dealing with will look at the rough market value of the product that you have along with how long you have owned it and even how long that remains in the warranty if applicable. They will then calculate a fair settlement or discount, known as a concession, from a new appliance.
This is perfectly normal and perfectly acceptable when done fairly. Just as it is within the car industry as mentioned previously.
Also remember that many warranties are limited to just parts or, in some cases even only specific components such as a motor and this would affect any repayment or replacement offer very dramatically if it came to it. The proportion of compensation that you can expect will almost certainly fall by a very considerable amount.
Make sure that you check the conditions of the warranty and that if what you want to happen is not specifically detailed there then it will fall back to normal consumer legislation or, normal trade practice in almost all cases. This is because it is often not possible to cover every single possible scenario or your warranty documentation would be more like War And Peace than a single page of dense text.
So let's look at a more real world examples to give you a flavour of what you can reasonably expect.
Let's take a hypothetical Siemens washing machine with a five year warranty on it that sold for £600 and see what happens when we apply some fairly common scenarios that would trip this sort of thing to happen.
The machine breaks down through use at three years old, the drum collapses mangling the wash heater and outer tank causing a leak onto the motor which in turn blows the main PCB.
Total repair cost is somewhere North of £450 so, obviously uneconomical given the age.
If it is a manufacturer warranty then it is possible (but not a given) that it would be repaired, even if there was a delay because the real cost of the parts is lower than the retail value and the chances are that the same will not occur in the remaining warranty.
A warranty company may take the view that it is worth the cost to repair as the chances are, from the history if there are no other failures, that the machine will see out the rest of the warranty without further trouble and the repair costs much less than the cost of replacing the machine.
Or, either may take the view that it simply isn't worth it, especially if there is a history of failure that would indicate high use or abuse.
In that case either would offer some sort of settlement based on the remaining warranty period or the perceived value of the machine. They do not normally, unless specifically noted in the terms, have any obligation to provide a new machine free gratis.
One of the most common ways to calculate out what is generally regarded as fair compensation in a case like this is to take the original purchase price, divide it by the number of months that the machine is covered for and to pay the balance of the remaining warranty period. Or, offer that same value as a concession on a brand new washing machine.
This has been tested with various Trading Standards offices and so on and is usually regarded as very fair because, the actual value of the machine in reality would most often be much, much lower.
Therefore in this case, if the machine was scrapped, you could expect to get about £240 back at best. Which would all too likely be considered to be more than reasonable by a court or Trading Standards etc, even if the owner wasn't over the moon about it.
The machine has a part that is no longer available or is not available as a spare and never has been and it is four years old.
In essence, as there is no legislation to compel any manufacturer to have spares available, it would work the same way as above but any option to repair the machine is removed, regardless of its history. There are good reasons why this can happen, it may not be nice and nobody in the industry is happy about it really but it is sadly unavoidable at times.
Usually when this happens there's nothing anyone can do other than offer some sort of other remedy such as a partial repayment or concession from a new replacement machine.
So here, using the above numbers you could only expect to get back about £120 at best.
Each manufacturer or warranty company looks at this in a slightly different light and what is on offer may well vary from company to company but you have to keep in mind that these are businesses, not charities and that they do not make huge sums of money selling appliances, quite the reverse. And that every time they are forced to exchange a product they are losing out big time.
Even if the company you are dealing with is paying you back any money at all they are in a loss making situation in almsot every single case where it has to happen. squeezing more out of them is at best going to be a challenge but, most probably nigh on impossible.
To expect to get a totally free brand new appliance under a normal warranty after a year or more is, to be blunt, unreasonable. Or, to expect a brand new upgraded new appliance is living in some far off fantasy land in most cases. Neither will happen or, if it does, you've been incredibly lucky indeed.
Even within the warranty period, a replacement appliance is only provided as a last resort, not the first course of action.
In some ways customers are afforded a huge degree of protection in UK law and, in others, it isn't so brilliant or, it can appear that way from the customer's perspective. But as with most things in UK legislation a lot of what happens is based around what is "reasonable" and that has to take into account the warranty company or manufacturer as well as the actual customer so that the result is fair and reasonable for all.
Most manufacturers and warranty companies in our experience are reasonable. Many more than reasonable in this respect.
Although, at times from disgruntled people's comments you may struggle to think so.
Get New For Old Cover
As we mentioned earlier you can get new for old cover in our industry, not a problem.
But, you will have to pay for it over and above your manufacturer warranty or you can find that policies and plans that provide this feature are considerably more expensive than one that provides a more basic cover.
All too often this sort of cover is given on either expensive "up front" warranties that will represent a significant cost of the appliance in the first place, usually 30% or more of the retail price of the machine.
Or you can get it on rolling monthly contracts which will usually be £100 or more per year so, over three or four years people have often paid the price of a new machine or more anyway.
The alternative is, you accept the risk yourself.