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Is an extended warranty worth the money?

Is an extended warranty worth the money?

When buying a product, whether it’s a car, appliance or electrical goods, it is important to understand the protections you have as a consumer.

Whenever a consumer buys a good or service, the Australian Consumer Law (“ACL”) gives them certain automatic protections that cannot be altered or taken away.

Many retail outlets these days offer an extended warranty that supposedly protects consumer rights further than the standard warranty. Generally they cover any damage over an extended period of time. However, consumers shouldn’t feel pressured into buying the extended warranty as they could be paying extra for rights they already have.

According to the consumer watchdog, the Australian Competition and Consumer Commission (“ACCC”), many people purchase extended warranties because they think it is their only protection if a product develops a fault after the end of the manufacturer’s warranty. This is not necessarily the case.

Under the ACL, suppliers andmanufacturers could still be obligated to provide a remedy even after the expiration of the manufacturer’s warranty. This is because consumer guarantees are not limited to a set period of time.

"... a consumer has a right to a refund, repair, or replacement through the store for a reasonable time after purchase."

The exact language of the relevant section states that a consumer has a right to a refund, repair, or replacement through the store for a reasonable time after purchase. The definition of ‘reasonableness’ depends on the quality and cost of the item. When it comes to expensive electronics, the ACCC released guidelines to make it crystal clear.

The guideline gives this example:

"A consumer buys a top-of-the-range plasma television for $1800. 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 to get more than two years' use from an $1800 TV. 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."

The law also stipulates that retailers must arrange transportation for large products like big-screen TVs and that you don't have to save the packaging.

As we become a more technologically advanced society, it becomes increasingly important to read the terms and conditions of purchase to fully understand what the extended warranty is offering you beyond your automatic rights under the ACL.

Before buying an extended warranty:

  1. Ask the retailer what benefits you will receive from the extended warranty over and above your automatic consumer guarantees.
  2. Get them to put all terms and conditions in writing.
  3. Don't feel pressured while buying the item. Take your time to weigh it up and make the right decision.

Last year the ACCC released its ACCC Shopper app which provides instant advice for consumers about their rights under the Australian Consumer Law as well as the capacity to store photos of your receipts so you always have your proof of purchase.

The free app can be downloaded from the Apple App Store and the Android Market by searching for 'ACCC Shopper'.

Today’s blog is written by In-House Consultant in Commercial Law, Toni Monteleone. Research for this blog has been performed by PLT student Matthew Rismondo.

Please note, this Blog is posted in Adelaide, South Australia by Andersons Solicitors. It relates to Australian Federal and South Australian legislation. Andersons Solicitors is a medium sized law firm servicing metropolitan Adelaide and regional South Australia across all areas of law for individuals and businesses.

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