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Extended warranty warning

CHOICE is reminding consumers to be on guard against retailers and manufacturers pushing unnecessary extended warranties in the lead up to Christmas.

22 December 2014

The warning comes in the wake of Fisher & Paykel and a company doing their marketing being hit with fines of $200,000 each for telling customers they needed to buy an extended warranty to protect their product against repair costs.

“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,” says CHOICE Head of Media Tom Godfrey.

“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,” says Mr Godfrey.

“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.”

“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.”

“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warranty is, compared to the price of the product, and consider how long your product is going to last before being superseded.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,” Mr Godfrey says. 

The ACCC has made 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.
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?

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