Over the weekend, I mentioned that our washing machine was on the fritz and that the repair guy was coming out this week to check it out. The verdict is in, and it’s not pretty. The good news is that the part that went bad is something that can be replaced. The bad news is that replacing that part means disassembling the entire washer, putting in a new part, and putting the whole thing back together, which would cost more than simply buying a new washer. Bottom line: we need to buy a new washer. Ouch.
An Unexpected Appliance Failure
I’m sure many of you can relate to this situation. Quite frankly, it’s pretty frustrating. Our washing machine was a pretty nice one. It was a front loading machine, easy to use, and gentle on clothes. I’ve written before about our experience buying our house, and what a mistake it was. However, one thing that we did right was that we negotiated that the washer and dryer (which were practically new) be included with the house. That was four years ago, so I’m going to estimate our washer to be six years old. So, while it isn’t like it was “new”, it certainly wasn’t “old”. We definitely weren’t expecting this appliance to go out on us (though honestly, does any appliance really go out when you expect it to?).
Finding a Replacement
A washing machine isn’t exactly something that you can wait a long time to replace. After all, we do have to wear clothes every day. My wife already went to her parents’ house earlier this week to do laundry, but that isn’t something we wanted to continue doing for any lengthy period of time. They’re happy to let us use their appliances, but it’s a 45 minute drive for my wife.
We considered a few replacement options. Since our house is currently for sale, and we’re including the appliances with the house, we hopefully will not be using the new washer for very long. So, we thought about buying a really cheap top-loading washer. However, going that route means we could no longer have our washer and dryer stacked on top of each other like we have them now. Also, there’s no telling when our house will actually sell, so we want to continue to have a nice washer. And even the cheapest new washer was close to $400.
We briefly considered buying a used front-loading washer from Craigslist. While this would have probably been the cheapest route, it would also have been the most difficult from a practical standpoint. I would need to pick up the washer, meaning either renting a truck or asking to use a friend’s truck. I would need to find someone to take away our old washer (though it’s possible that our trash service may have taken it). I would need to physically take out our old washer and put in the new one (with the help of friends). And there’s always a certain degree of risk when buying a used appliance.
So, we decided to purchase a new washer. Since we really like our old washer, we purchased the current model of the same brand. It’s a front-loading machine, meets the energy star requirements, and scored very good customer reviews. It includes free delivery and installation, and they will also haul away our old washer for free. The total cost after sales tax: $625.
Paying For It: Emergency Fund vs. Financing
People tend to have strong opinions when it comes to how to pay for something like this. Since we do have an emergency fund, we could simply pay cash for the new washer and be done with it. However, $625 would put a sizable dent in our emergency fund.
The store was offering six months of no-interest financing if we signed up for the store credit card, but this really wasn’t that great of an offer.
Instead, I went another route. I signed up for a new standard rewards credit card and put the purchase on the new card. (Well, technically I haven’t yet but will. I put the purchase on our regular credit card and signed up for the new card that evening. Once it arrives, I can go to the store, get a refund on the original card, and put the purchase on the new card.) If it sounds like I’m jumping through some hoops, you’re right. But, the new card comes with a $115 cash signup bonus and 15 months of 0% interest. So I can apply the $115 bonus directly to the balance of the purchase, and the $625 cost of our washer instantly drops to $510. Since the new card has 0% interest for 15 months, I can spread the cost over that period and pay $34 a month without touching our emergency fund. Now, $34 is a much more manageable figure, so we can work that into the monthly budget and just pay it out of our monthly cash flow.
The Bottom Line
Replacing an appliance is certainly not an enjoyable task, as I’m sure you all would agree. There are a lot of things to consider: features of the appliance, purchase price, energy efficiency, reliability, etc. Time will tell if we made a good purchase, but I think we did alright.
And I know that many people are going to say we simply should have paid cash from the emergency fund and just been done with it. But, keeping that emergency fund intact lets me rest a bit easier. The signup bonus and no-interest period of the new card are also really good and help to lower the overall cost of the washer. In my opinion, sometimes having good credit provides access to special offers that simply beat using cash.
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Lance@MoneyLife&More
August 8, 2012 at 2:58 pm (UTC -4) Link to this comment
You did what works best for you and as long as you pay it off you should be fine. Good job not going for the store card though. There are definitely better deals out there as you showed!
Justin
August 9, 2012 at 9:54 pm (UTC -4) Link to this comment
I bet they get a lot of people with the store card offer. They made sure to tell me I was pre-approved and brought it up more than once.
Modest Money
August 8, 2012 at 3:12 pm (UTC -4) Link to this comment
I’m all for using credit cards to your advantage like this. The Dave Ramsey crowd may shun credit cards as pure evil, but that is just avoiding taking responsibility for your own actions. It sounds like you got a great deal and getting great benefits from this route. Plus when you put items on your credit card, they often extend the warranty and offer extra buyer protection.
By the way, if you ever need to junk any large appliances like that, post it on craigslist as free. Some random scrap metal recycler will gladly take it off your hands knowing they can get a decent return on it for all the metal. That’s what I did with my old rusted BBQ. I have no idea how much money they get for something like that, but maybe it would be worthwhile to bring stuff to a metal recycler yourself.
Justin
August 9, 2012 at 9:57 pm (UTC -4) Link to this comment
You make some great points Jeremy. I didn’t really even think about the extended warranty I get by putting it on my card. And I didn’t even think about the Craigslist option for appliance disposal. My dad actually did that a year or so ago with freezer that no longer worked.
Tackling Our Debt
August 9, 2012 at 1:20 pm (UTC -4) Link to this comment
I agree with your decisions, especially since you get money back on the new card immediately and it is at zero percent interest. Keeping your emergency fund in tact is smart. You never know when emergencies far more serious than this will pop up and you will NEED cash right away.
I can relate to your story as well. We sold our new home 3 years ago. When we bought the home 4 years earlier it was brand new and we bought a fancy Maytag washer and dryer set. In 2009 the fancy dryer stopped working and the repair guy said that yes he could spend the day taking it apart and repairing it, but his time would cost us a lot. The estimate was close to the price of a new dryer. So we went and bought a good but very inexpensive dryer to replace it. I was actually quite disappointed that we had to replace it after only using it for 4 years.
Justin
August 9, 2012 at 10:04 pm (UTC -4) Link to this comment
Exactly! Keeping that liquidity with the emergency fund is important. We looked at our old washer again, and it’s actually 10 years old. So I don’t feel quite as bad about it going out on us. But I still think that appliances just aren’t made as well as they used to be. I remember hearing people talk about how their washer and dryer lasted for 20 years or more. I doubt any appliance made today will last that long.
Bridget
August 9, 2012 at 1:24 pm (UTC -4) Link to this comment
I would have done the same.
It seems counterintuitive at first glance, but sometimes the math just works out that way! It’s all about getting the most out of your money, which is what you did here =)
Justin
August 9, 2012 at 10:05 pm (UTC -4) Link to this comment
Thanks for the feedback! I’m a strong believer in always running the numbers for that exact reason. Sometimes the common rule-of-thumb doesn’t end up being the best option.
JW @ AllThingsFinance
August 19, 2012 at 5:00 pm (UTC -4) Link to this comment
I think this same philosophy applies to larger purchases as well. Recently, I received an auto loan at 2.79%. I’m earning 5% on my emergency fund, so it makes more sense to borrow the money instead of paying cash.
Justin
August 20, 2012 at 10:59 pm (UTC -4) Link to this comment
I agree. With interest rates as low as they are right now, I would certainly take an auto loan rather than paying cash. Though, I have to ask: where do you keep your emergency fund that you’re able to earn 5% on it?
Sunday's Special Links: Thievery Edition
August 19, 2012 at 5:57 pm (UTC -4) Link to this comment
[...] When Credit Beats Using Your Emergency Fund. Thankfully, I was able to secure a very low rate below 3% to purchase a new vehicle. Because I’m earning 5% on my emergency fund, it makes more sense to borrow the money. Justin @ The Family Finances discusses this philosophy in terms of appliance replacement. [...]