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Extended Warranties – Are They Worth It?

Delia Rickard
7th February, 2016

Many consumers purchase extended warranties because they do not realise the extent of the protections provided by the Australian Consumer Law (ACL). Don’t pay for protections you already have.

Retailers may try to sell you an extended warranty or ‘care package’ to supplement the manufacturer’s warranty, such as by extending the length of time for covering repair costs. Some retailers claim that an extended warranty provides extra protections you wouldn’t usually get. This isn’t always true.

If a product is faulty you have rights under the ACL to a repair, replacement or if there is a major failure, a refund. These rights automatically apply regardless of any warranties and they apply for a reasonable time depending on the nature of the goods or services. This means your rights may continue to apply after the warranty period has expired.

Shopping tips

You don’t have to buy an extended warranty–it is optional. Before buying an extended warranty, always ask the supplier to list what it gives you over and above your automatic consumer guarantees. The bottom line is that you shouldn’t pay for coverage you already have, find out more about your rights at http://www.accc.gov.au/consumers/consumer-rights-guarantees

You can also download the ACCC Shopper app. The app allows you to find answers to common questions such as ‘when can I get a refund?’ The app provides a handy source of authoritative information if you have to resolve a dispute with a salesperson. It also provides tools to set reminders for your warranties and gift vouchers and allows you to store your receipts as photos on your phone. http://www.accc.gov.au/about-us/tools-resources/accc-shopper-app

The potential to mislead

The ACCC has taken action to ensure businesses don’t mislead customers about their rights. Last year, Fisher & Paykel Customer Services Pty Ltd and Domestic & General Services Pty Ltd landed in hot water. They sent letters containing a false or misleading statement that consumers wouldn’t be protected against repair costs for their appliance after two years unless they purchased an extended warranty. In reality, the law may protect consumers beyond the manufacturer’s warranty period without the purchase of an extended warranty.

We are looking to businesses to lift their game. Lumley, a large company which underwrites and administers extended warranties on behalf of many retailers, recently took steps to improve practices. The ACCC considered that brochures offered by retailers had the potential to muddy the waters about remedies available under the extended warranties and those already available to consumers under the law. In an industry first, Lumley has provided undertakings to make the brochure clearer, train staff and work with retailers to improve selling practices.

Delia Rickard
Deputy Chair
Australian Competition and Consumer Commision

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