Extended Warranties - What are you really buying?

23-Jan-12

Extended Warranties – What are you really buying?.

You may remember when you were last buying a TV, mobile phone, computer or laptop, just as you had made your decision on which item you want, the salesperson would ask “would you like to buy the extended warranty for peace of mind”.

So what does this warranty cover?

The new Competition and Consumer Act 2010 deals with what level of service a manufacturer is required to provide to its consumers. 

Firstly, a salesman or retailer cannot make a representation that after the initial 12 month warranty has expired and the product consequently breaks or cannot be used for its ordinary uses, any cost of repair will be at the detriment of the consumer. Such representation would be prohibited under the Act as the representation would be false. 

So what rights do you have under the Act?

The Act provides that goods are to be of an acceptable quality, this means that the goods are safe, durable, free from defects and do everything they are commonly used for.  If the goods are treated in an unreasonable manner or are used in a manner inconsistent with the products intended manner then the consumer would be liable to pay for any repair.

A product must live up to any representation made by a salesman or manufacturer, or any sample or demonstration provided at the retail store or by the manufacturer.

The Act also provides that if you buy a product the manufacturer must provide spare parts and repair services for a reasonable time after the purchase.  What is reasonable is determined by the type of product.

Here is an example of how the Act could apply:

If Tom purchases a $4,000 TV and does not buy the extended warranty and after 1.5 years the TV loses its picture, Tom then emails the manufacturer who replies that the initial year warranty has expired and he would therefore be required to repair the TV elsewhere at his own expense. 

Now just because the 12 month warranty has expired, Tom may still be able to seek a repair as the product may be considered to not be of an acceptable quality when considering factors such as the price paid and that the approximate length that TV’s are suppose to last.  The manufacturer will likely be required by law to repair or replace the TV. 

Generally mobile phones on contracts must remain operable and serviceable for the life of the contract.

So what do you pay for in extended warranties?

What extended warranties tend to cover are additional services that assist with a repair.  These may include support hotlines or rental equipment whilst a repair is occurring.  They may also provide additional rights to the consumer that go beyond what the Act provides.  An extended warranty will not override any rights given by the Act but instead may extend or supplement a person’s rights.  It is therefore important to read what the benefits of the extended warranty are before you buy it because you may be paying hundreds of dollars for rights you already have and others that you do not need. 

Retailers must therefore take great care in that they do not misrepresent what their extended warranties contain and more specifically do not claim that after the initial 12 month warranty expires the consumer would be unable to receive a repair or replacement. 

If you wish to discuss how to word your extended warranties and avoid breaching the Competition and Consumer Act 2010 or you wish to obtain advice as to whether you are entitled to a repair outside the original warranty then please do not hesitate to contact us on (08) 9375 3411 or at admin@lynnandbrown.com.au

Please note that this article only relates to purchases on or after 1 January 2011.