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Extended warranties a waste of money – Consumer boss

More about money making than any benefit the buyer, Chetwin warns. With special feature audio.

Thu, 17 Mar 2016

The Dick Smith collapse refocused attention on extended warranties.

For a period, it was not clear if 135,000 extended warranties sold by the failed retailer would be honoured (yesterday it was confirmed they will be).

But the broader question is: do you need to buy an extended warranty in the first place?

Consumer chief executive Sue Chetwin says the practice is more about profit-making for retailers than benefits for the buyer.

“There are virtually no situations where the [extended] warranty gives you better coverage than you can get under the Consumer Guarantees Act (CGA),” Ms Chetwin says.

The Act says goods must last a reasonable time. A Disputes Tribunal can judge that a reasonable time is more than the 12 months typically afforded by a warranty. 

If a product fails within a reasonable time, it must be repaired, replaced or refunded in a reasonable time. The retailer has prime responsibility under the Act. If a retailer goes bust, you can approach an importer or manufacturer – though in logistical terms that can be trickier.

“Under the new consumer law, it’s up to the retailer to tell you about the Consumer Guarantees Act, and if there is anything about their [extended] warranty that’s better, than the Act,” Ms Chetwin points out.

This is an interesting point. I’ve often annoyed checkout clerks at Dick Smith and other chains by piping up with, “You’re covered by the Consumer Guarantees Act” when there’s an attempted up-sell on the person queueing in front of me. I’ve never heard a shop assistant proactively mention the CGA.

An important point to note is that business sales are not typically covered by the CGA.

I found that after I bought a Dell laptop through an NBR account. It died shortly after purchase and Dell, to my annoyance, replaced the motherboard with a second-hand part.

I thought I would just claim a refund under the CGA and be done with it – but no dice. I got on the phone to Consumer but, in this instance, the law did not have me covered.

Sellers can and do contract out of the CGA for sales to business customers. 

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Extended warranties a waste of money – Consumer boss