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Extended warranties – are they necessary?

It's pretty common these days to be on the receiving end of an extended warranty sales pitch whenever you purchase a TV, laptop, mobile, car or other item. It's the electronic goods equivalent of "Do you want fries with that?"

But are extended warranties all they’re cracked up to be?

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Does an extended warranty provide any more benefit than the Consumer Guarantees?

Many people purchase extended warranties only to find that they didn't cover what they thought they would.  Or they get the run around with repairs and services.

What the sales person might not be telling you

In Australia, the law gives consumers a range of automatic rights when they purchase goods or services.  These rights will apply regardless of whether the consumer purchased an extended warranty or not.  They are called consumer guarantees.

Before you purchase an extended warranty, weigh up whether you actually need it.  Will you be adequately protected under your automatic legal rights (consumer guarantees)?  Or will you really benefit from the extended warranty terms? 

Ask the sales person:  “What rights will the extended warranty give me, that I don’t already have under the Consumer Guarantees”.

You might be surprised - the purchase of extended warranty provisions may be unnecessary – and sometimes, your automatic consumer guarantees offer more than those expensive extended warranties you feel so pressured into buying.

Unfair pressure to buy a warranty

Retailers make a handsome profit on the sale of extended warranty provisions and will push their sale at every opportunity.

It is illegal for retailers to put undue pressure on you to buy extended warranty terms.

It is also illegal for retailers to mislead you and sell you rights that you automatically have under the consumer guarantees. The government has been cracking down on retailers recently, and in some cases, taking action against these highly misleading practices.

How do the consumer guarantees they work?

Products that you purchase must be of an acceptable quality.  The law says they must be:-

  • fit for all purposes for which they are supplied (ie. if you buy a toaster, it must be able to toast bread);
  • acceptable in appearance and finish;
  • free from defects;
  • safe; and
  • durable.

Example

When purchasing an expensive, high-quality product, it is reasonable to expect it to last for many years, not just the standard 12 month warranty period.

Phil purchased an expensive, high-end camera, and it broke after four years.  It is reasonable to expect that a state of the art camera purchased for $5,000 would be durable and last longer than four years.  It would be probable that the consumer guarantees would apply, even though the standard warranty given by the retailer or manufacturer, may have been for a lesser time.

On the other hand, it would not be reasonable to expect the consumer guarantees to apply to a $49 camera if it failed after four years.  It would be easier and cheaper to purchase a new $49 camera after four years than to have purchased an extended warranty.

When considering whether a product is of acceptable quality, think about:-

  • the price you paid for the product;
  • the nature of the product;
  • any statements made on the packaging or label;
  • any representations made about the goods by the supplier or manufacturer; and
  • any other relevant circumstances relating to the supply of the goods.

Will I be compensated?

If you have purchased goods or services that fall short of the consumer guarantee’s, you will be entitled to a repair, replacement, or refund.

You will have these rights regardless of whether the retailer or manufacturer supplied a warranty, and whether or not you purchased an extended warranty.

If you suffered extra damages or loss, you may also be able to claim compensation.

infoIf you have experienced faulty goods, your first port of call should be to contact the business where you purchased the item.  If they don’t resolve the issue to your satisfaction, contact the Department of Fair Trading / Consumer Affairs in your state.

When the consumer guarantees do not apply

You will not be entitled to a refund or exchange just because you changed your mind about a purchase (although some stores do have refund or replacement policies).

Additionally, if a defect was pointed out to you before you decided to purchase a product, you will not be entitled to rely on the consumer guarantees.  For example, a dress with a broken zipper is heavily reduced, and you decide to buy it because it’s a bargain and you’ll be able to fix it yourself.  You won’t be entitled to a refund because of the defect.

Other instances where the consumer guarantee do not apply are:-

  • if the consumer caused the product to become of unacceptable quality, or failed to take action to prevent the product from becoming of unacceptable quality;
  • the goods were damaged by abnormal use; or
  • if the consumer examined the goods before purchasing, and the examination should reasonably have revealed that the goods were not of acceptable quality.

Always question the benefits of an extended warranty

If you are feeling the pressure to purchase an extended warranty, a good question to ask if you are put on the spot is:  “What benefits of the extended warranty will I receive, that I don’t have already under the consumer guarantee laws?

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