Commissioner's Blog: Don’t waste money on extended warranties
With Commissioner for Consumer Protection Lanie Chopping
Are you looking to buy white goods, electrical items or a new car in the near future? Chances are you’ll be offered an extended warranty by the salesperson but you need to think twice before saying “yes” because you could be wasting your money.
In Australia, things we buy from a business come with a number of automatic guarantees due to our consumer laws. Consumer Protection often finds that extended warranties – which are really a type of insurance policy – can result in consumers paying for repair or replacement rights they are legally entitled to for FREE.
Under the Australian Consumer Law, any product or service purchased from a business must be:
- without faults;
- fit for the intended purpose;
- matching any description or sample; and
- last a reasonable amount of time, depending on what it is and how much it cost.
When you’re in a shop or car dealership, a salesperson might highlight the manufacturer’s warranty expiry date as a way to upsell you an extended warranty. But if we consider an example of a $2,000 TV with a manufacturer’s warranty of 12 months, if something goes wrong after 18 months, consumer law will protect the purchase because it’s reasonable to expect an expensive TV to last longer than one year.
Salespeople might claim an extended warranty is the easiest way to deal with problems with a purchase in future but claims you will get a replacement “hassle-free” in the event of a fault should not be a drawcard. You don’t need to buy a warranty to get redress in the event of a fault and you won’t have to deal with the manufacturer directly – a retailer should do this on the consumer’s behalf.
So next time you’re offered an extended warranty, ask lots of questions and press the seller on the benefits that are above and beyond consumer law. Why buy an insurance policy for a scenario that is already covered for free?!
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