Expensive extended warranties sold with electrical goods look set to fall under fresh scrutiny by consumer rights activists and the Office of Fair Trading - The Observer
The Consumer Protection from Unfair Trading Regulations - which came into force because of an EU directive at the end of May 2008 - prohibit the 'selling' of rights that people already have in law. But some consumer rights groups argue that extended warranties often do just this, playing on consumers' ignorance. Marc Gander, a founder member of the Consumer Action Group, believes many extended warranties trick consumers into buying insurance that offers them little or no better protection than they already have by law. 'Extended warranties are often an expensive rip-off,' he says. 'These goods are supposed to work for a certain length of time, so what a great trick it is to get consumers to buy an extended warranty in case a product goes wrong too early.'
Many electrical goods have a 12 month manufacturers guarantee anyway, and sometimes repairs are covered by other insurances. LCD TV and touch screen manufacturers claim a 60,000 hour to 100,000 hour product life which at 16 hours use per day is equivalent to a 10 - 17 year lifetime similar to the older style CRT TVs - a 3 year extended warranty may cost you £250 (US$375) or more, when failure, if any, is more likely to happen in the first 12 months which is already covered by the manufacturers guarantee.
Richard Lloyd, executive director of Which?, said: "Our research highlights that many of the warranties on offer today are worse value than ever before and ignore the fact that appliance reliability has improved significantly. We want to see better products at reasonable prices and for people to feel clear about what they are buying”.
Under current rules, retailers have to make it clear that buying an extended warranty is optional and not compulsory.
In the United Kingdom the extended warranty market has been subject to several investigations. In 2002 the Office of Fair Trading decided that self-regulation of the industry had failed and passed the case onto the Competition Commission. This concluded that the market was not acting in the interests of consumers. The Citizens Advice Bureau have expressed concerns about extended warranties being mis-sold.
Extended warranties are an extra cost, sometimes for a percentage of the item's retail price. Occasionally, some extended warranties that are purchased for multiple years state in writing that during the first year, the consumer must still deal with the manufacturer in the occurrence of malfunction. So, what is often promoted as a three-year extended warranty is actually only a two-year warranty and since usually a claim is only likely to be made during the first few months, if at all, this would be covered by the manufacturers original guarantee.
What makes warranties 'extended'
When you buy a product, it's usually guaranteed by the manufacturer for a period, usually a year. An extended warranty will normally cover goods for longer, perhaps three or five years. An extended warranty is coverage for electrical or mechanical breakdown. It may or may not cover peripheral items, wear and tear, damage by computer viruses, normal maintenance, accidental damage, or any consequential loss
Limited cover
No guarantee or warranty will cover everything. Check your warranty documents, but it is likely there is a clause that explains this exclusion. If you can't find it, insist on the company showing it to you.
However, under the Sale of Goods Act 1979 (as amended) the retailer itself might be liable to repair or replace the machine, if it is considered unreasonable for the fault to have developed so soon after purchase.\
Advice from Which? Extended warranties: know your rights
Do you need an extended warranty?
Not all extended warranties offer the same sort of cover or protection and we believe they're often not worth the money. Which? tests show that most modern appliances are unlikely to break down in the first few years.
How to cancel an extended warranty
Can I cancel a warranty and get a full refund? Yes – if you change your mind after buying an extended warranty that lasts more than a year for a domestic electrical appliance, you have 45 days from when you take out the warranty to cancel it and get your money back. You don't need to give a reason.
Extended warranties for electrical appliances
The most common extended warranties are for domestic electrical appliances, but not exclusively and some audio visual distributors are also offering extended warranties. With these, there are laws to protect you from being pressured into buying an extended warranty without having the chance to consider it properly, or shop around for the best deal.
A manufacturer's warranty and Consumer Protection from Unfair Trading Regulations, for products like LCD touch screens, provides you with the best deal and lowest cost – don't be misled by extended warranties that add to the cost and most likely provide little in real term benefits.