Extended Warranties


Are they good value?

Many aircraft owners have purchased these, at least at some point during the aircraft ownership, mostly for avionics. And many have made claims under them.

There is no doubt the warranties work. The question is whether these warranties represent good value.

I once had an extended warranty for a collection of Honeywell avionics. It cost £2000 for two years. Just before it ran out, the KI-229 RMI failed. I put in a warranty claim and got it replaced. The replacement (exchange) unit, which was shipped to me directly from a UK Honeywell dealer, was accompanied by an invoice for around £3800. So, I thought, "this is great - I've done well out of this warranty!!"

Actually, no. The replacement was an overhauled unit and according to a date sticker on the back was about 13 years old. This turns out to be standard practice - the warranty replacements are not "new for old"; they come out of a pool of warranty exchange equipment which is "new" as in "aviation new" which means it has not been used since it was last overhauled. Many avionics products (obviously excluding very recent introductions) are 10-15 year old designs, and most predominantly mechanical items in common usage (e.g. the standard Bendix-King HSI / gyro / fluxgate compass system) are 20-30 year old designs. The warranty replacement can be of any age up to the upper limit, and from my experience and from speaking to people in the industry, 5-10 years seems to be the average age of warranty replacements. There is no real downside to this however - unless you get an item which was returned with an intermittent fault, is returned to service, and the fault returns when you get it. Overhauled items which were cosmetically damaged tend to be repainted and tend to look like new.

What is the real cost of obtaining an overhauled piece of avionics? The USA has a well developed market where new and overhauled avionics are freely sold, with the right documentation but with no questions asked whether you are an avionics shop. One US avionics dealer lists the said KI-229 RMI (066-03038-0000) at $4925 for a new one, $2500 for an overhauled one, and a mere $950 for an exchange-overhaul one. The $950 is the real comparison with the £3800 ($7600) invoice referred to above!! (There is a subtle caveat: the repair cost of your return unit must not exceed a certain percentage of the $950; if it does then you have to pay the $2500. But $2500 is still way less than $7600, and you get to keep the original which can be sold to an overhauler). The US dealer should include an FAA 8130-3 form which is good for any N-reg aircraft, or for any G-reg aircraft not operated under an AOC (some notes on documentation are here).

Wholly or mostly "mechanical" instruments can be repaired for much less than most would expect. Some instrument repairers will repair many instruments for around £500, and indicated a repair cost of under £1000 for the KI-256 vacuum horizon which lists new at an eye watering USD 10,000 to 24,000. Moreover, when such a horizon is used as the pitch/roll source for an autopilot, a repair restricted to e.g. motor bearings (which is exactly what tends to pack up on this kind of product) can avoid the lengthy (a good 1 man-day) recalibration procedure which is otherwise necessary on such a system and which very few avionics shops have the special equipment for.

All in all, it would take an exceptional rate of instrument failures to add up to the cost of the extended warranty. There are avionics with known dreadful reliability but not many.


The big drawback...

There is a catch in doing the above. Several in fact; whether these matter depends on how much value you attach to a long term relationship with a specific installer.

Your avionics installer is not going to make a margin on the supply of the equipment (even if he bought the equipment from SE Aerospace himself, they do not offer dealer discounts) and will therefore be reluctant to handle equipment supplied by you the customer - other than in the context of a reasonably valuable package of some other business and preferably in the context of a long term relationship. Sometimes this can be solved by giving the installer a percentage of the installed equipment list price, but that implies him accepting some responsibility for the hardware... If you are going to supply the equipment, it's worth having a friendly small - preferably freelance - local avionics installer and, for an N-reg, an A&P/IA who can sign off the installation. This is a curious area in which being N-reg is an advantage over G-reg because there are more freelance FAA qualified inspectors around. The smaller freelance installers are not normally looking for a big job involving the supply of equipment anyway since it would push them over the mandatory VAT registration threshold.

In general, avionics installers don't like customers who "cherry-pick" (use different installers for different jobs) and this is incidentally one reason why getting itemised quotes out of them can be difficult.

You have to pay for the installation labour yourself, whereas an extended warranty would have covered the labour too. Fortunately, the labour in replacing an instrument already in the panel is usually trivial; most large instruments are plug-in replacements secured by a standard 3/32" allen screw and those which are held with four screws don't take much longer to change. One big exception is an autopilot computer which may need an extensive calibration procedure which can be done only by an avionics shop with the equipment and the knowledge.

Refurbished avionics do quite often have latent faults. In my experience, this runs at around 30%. Intermittent faults are a common feature in these cases and these, along with just about any subtle fault, are unlikely to get picked up by the repair shop which just follows the factory test / repair / overhaul sequence. It is a significant source of irritation because while the item itself will get swapped under the 6-month warranty typical of refurbished items, the installation labour cannot be reclaimed (short of the extreme case of going to litigation). Of course, this applies equally to replacements supplied under an extended warranty! The difference with the latter is that you don't have to pay for the labour again. But no warranty (again, short of going to litigation) is going to cover the hassle of flying to the avionics shop, staying in a hotel, etc.

There is shipping, import duty and VAT to pay on the instrument purchased from the USA.

Most pilots do not get involved in maintenance to this degree. If something needs doing, they drop the aircraft off at their dealer and let the dealer sort it out. This is how the industry expects customers to do things, anyway, and the extended warranty system is designed to support that. However, the cost of operating this way is going to be significantly higher than if one takes a more pro-active role.


Last edited 4th August 2010.

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