15apr extended mystery shop hero
2 April 2015

Be wary of extended warranties

Extended warranties promoted with misleading claims.

A Consumer NZ mystery shop of big-box retailers has found sales staff promoting extended warranties with misleading claims.

Consumer chief executive Sue Chetwin said extended warranties had been a lucrative sideline for retailers but the warranties were of limited value to most consumers.

“Retailers argue it’s worth paying extra for an extended warranty because it gives you ‘peace of mind’ they’ll sort things out if a product is faulty. But in most cases, you’re paying for protection you already have by law,” Ms Chetwin said.

The Consumer Guarantees Act requires goods to be of acceptable quality. “If they’re not, you’re entitled to ask the retailer to put things right. You don’t need to buy an extended warranty to get this cover. Sales staff who claim otherwise are misleading consumers about their rights,” she said.

A Smiths City sales rep claimed Consumer’s shopper would have to fight it out with the manufacturer if a product developed a fault and the shopper hadn’t bought an extended warranty.

Ms Chetwin said the claim was wrong. “The Consumer Guarantees Act provides powerful after-sales protection. If a product isn’t of acceptable quality, the retailer has a responsibility to provide a remedy. You don’t have to go into battle with the manufacturer.”

Ms Chetwin advised shoppers heading to stores this Easter to be wary of claims they should buy an extended warranty when they purchased a new appliance.

Ms Chetwin said the extended warranty sales pitch had not changed significantly since Consumer last sent mystery shoppers into big-box retail stores in 2012. “Back then, sales assistants promoting extended warranties also failed to mention the rights shoppers have under the Consumer Guarantees Act.”

Recent law changes mean anyone who buys an extended warranty now has a “cooling-off” period of five working days to cancel and get a refund. “Retailers have to tell you about this cooling-off period when you’re in the store,” Ms Chetwin said.

Smiths City, Noel Leeming and Harvey Norman outlets were included in Consumer’s mystery shop. Sales reps at the surveyed stores suggested an extended warranty to provide extra cover after the manufacturer’s warranty ended.

About the Consumer Guarantees Act

The Consumer Guarantees Act covers goods and services ordinarily purchased for personal, domestic or household use. The Act obliges retailers to guarantee their products are of acceptable quality, fit for purpose and match their description.

If a product fails to meet one of these guarantees, consumers have the right to insist the retailer puts it right. If the problem is minor and can be fixed, the retailer can choose to repair or replace the item or provide a refund.

If the problem can't be fixed, can't be put right within a reasonable time, or is substantial, the consumer can:

  • reject the product and choose a replacement (of the same type and similar value) or a full refund of the purchase price OR
  • keep the product and claim compensation for any drop in its value caused by the failure.

A substantial failure means:

  • A reasonable consumer wouldn't have bought the product if they'd known about the fault.
  • The product is significantly different from its description, sample or demonstration model.
  • The product is substantially unfit for purpose.
  • The product is unsafe.
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Our mystery shop

Retailers risk breaching the law if they try to sell an extended warranty by claiming you would have no protection without one. But our 2015 mystery shop found these warranties continue to be sold with misleading advice about shoppers' legal rights.

Learn more

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