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Extended warranties (Business)

Some suppliers or manufacturers offer extended warranties to lengthen the coverage of their basic manufacturer’s warranty.

Usually, consumers are offered the chance to buy an extended warranty after, or at the time, they buy the goods.

Example:

When a consumer buys a deck chair the retailer says the consumer can pay an extra $20 for an extended warranty, to make sure the manufacturer’s warranty applies for three years instead of two.

Some suppliers or manufacturers also tell the consumer an extended warranty provides extra protection, which the consumer would not have unless they buy it.

This is not necessarily true. The consumer guarantees provide rights that exist despite anything the supplier or manufacturer may say or do. Extended warranties are optional.

You must not:

  • pressure consumers to buy an extended warranty; or 
  • tell a consumer that they must pay for any rights equivalent to a consumer guarantee.

When selling extended warranties, you should explain to the consumer what an extended warranty would provide, over and above the consumer’s rights under the consumer guarantees.

Example:

A consumer buys a plasma television for $6,000. It stops working two years later. The supplier tells the consumer they have no rights to repairs or another remedy as the television was only under the manufacturer’s warranty for 12 months. The supplier says the consumer should have bought an extended warranty, which would have given five years’ cover. A reasonable consumer would expect more than two years’ use from a $6,000 television. Under the consumer guarantees, the consumer therefore has a statutory right to a remedy on the basis that the television is not of acceptable quality.

The supplier must provide a remedy free of charge. This may also amount to misleading a consumer about their rights.

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