Don't waste your money on extended warranties

While extended warranties promise to pay for repairs for a specified period after the manufacturer’s warranty has expired, you’re likely paying hundreds of dollars for protection you already have under consumer law.

Our latest retailer survey found that three big retailers – Harvey Norman, Noel Leeming and Apple Stores – were the most likely to offer an extended warranty.

Only 2 to 3% of shoppers at the three big retailers were told by store staff what protection they already have under consumer law.

The more expensive the item, the more people were offered a warranty. This is especially so for large appliances (54%) and home tech (50%) purchases across all retailers surveyed.

Extended warranties may also be marketed as product care or damage protection plans.

We were happy to see only 3% of people who were offered an extended warranty went ahead with buying one. Although, we suspect this is because we surveyed our members and supporters, and they’re likely to be more clued up on their rights.

You’re already covered

Under the Consumer Guarantees Act (CGA), manufacturers and retailers are obliged to guarantee the products they sell are of an acceptable quality and fit for their purpose. Most appliances, certainly the big-ticket ones, can be expected to perform well for many years, not just the period covered by the manufacturer’s warranty.

This means that if your product develops a fault when it’s still reasonably new, you can have it repaired or, if that isn’t possible, replaced – even if the manufacturer’s warranty has expired.

If the fault is substantial, you can choose between a refund, repair or replacement.

Therefore, there’s no value in having an extended warranty if the only thing it gives you is cover beyond the period of the manufacturer’s warranty.

The extended warranty may cover accidental damage, but so does your home and contents policy – for example, your contents insurance should cover damage to computers and electronic appliances from power surges.

When is an extended warranty a good idea?

An extended warranty is worth considering if it goes beyond the protections provided by the CGA. An example would be if a warranty guarantees replacement with a new item if something goes wrong, rather than having to wait for repairs.

When selling you an extended warranty, the retailer should tell you the extra rights it gives you on top of the CGA.

And remember, the CGA doesn’t apply to goods normally used for business purposes. So, if you’re buying items for business use, extended warranties may give you protection you don’t automatically have by law.