Do you really need an extended warranty when buying products? It depends on what the extended warranty offers and when it kicks in, as Australian Consumer Law can already cover you with ‘automatic guarantees’.
So, why is Choice making this warning, and what is its advice?
The consumer advocate notes appliance company Fisher & Paykel and the company doing its marketing have been hit with $200,000 fines - each.
Why? Because they were ‘telling customers they needed to buy an extended warranty to protect their product against repair costs.’
Choice Head of Media, Tom Godfey explains: “Whether you are buying electronics, whitegoods or cars, retailers and manufacturers will often try to up-sell you with an extended warranty, but knowing your consumer rights can save you time and money.
“It’s not uncommon to encounter salespeople spruiking the benefits of extended warranties to give you ‘peace of mind’, but the fact is when you buy a product you are covered by the automatic guarantees provided by the Australian Consumer Law.
“Consumers have a right to refund, repair or replacement through the store for a ’reasonable’ time after purchase and these rights work alongside a manufacturer's basic warranty, which might last for 12 or 24 months.
“If you are considering buying an extended warranty it’s important to remember they are separate promises to you from the manufacturer. They cannot exclude the automatic guarantees", says Godfrey.
“It’s worth reading the terms and conditions to ensure the extended warranty gives you rights over and above your rights under the consumer law. Ask the salesperson to explain exactly what extra benefits you will get. They are required to tell you," continues Godfrey.
“You should also think about how expensive the extended warranty is, compared to the price of the product, and consider how long your product is going to last before being superseded. Maybe you don’t want that costly five-year extended warranty after all.
“An extended warranty worth having exceeds your basic consumer rights with benefits such as extended customer support, allowing you to borrow a replacement product while yours is being repaired or covering you for accidental damage,” concludes Godfrey.
Choice then notes what the ACCC advises, with the ACCC making it ‘very clear that manufacturers and retailers must not:’
- pressure consumers into buying an extended warranty
- mislead consumers into buying an extended warranty, when it does not provide benefits beyond consumer guarantees.
Choice then lists ‘questions to ask before buying an extended warranty:’
- How long does the extended warranty last and how much does it cost?
- When does it start? From the date of purchase or after the manufacturer’s warranty expires?
- Are there any special requirements to keep the extended warranty valid? For example is there a special cleaning regime that must be followed?
- What exactly is covered by the extended warranty? For example, does it cover labour and parts?
- Are there important exclusions and restrictions? For example, is the customer responsible for freight costs?
- If the extended warranty promises to replace your product or give you a refund, is there a depreciation clause?
- How difficult is it to make a claim and who do you claim through? Are there fees involved?
- Is the cost of the extended warranty worth it compared with the cost of the product and its likely life expectancy?
- Will the extended warranty give you more protection than you already have with automatic consumer guarantees?
So... I can happily say that Choice's advice is most worthy. If the answers you get to the questions above ensure you genuinely get additional benefit and coverage beyond those guaranteed by the Australian Consumer Law, then an extended warranty may well be worth considering.
If not, and you get one anyway, you may end up giving a Christmas present to the retailer and extended warranty seller that you never intended - so shop wisely!