Should I buy an extended warranty?
You’ve bought a nice new printer, electric kettle or smart phone and the super helpful salesperson asks if you’d like an extended warranty or product protection. They politely suggest it’ll only cost a small amount and you can feel safe and sound, knowing your shiny new appliance is covered for an extra couple of years.
STOP.
Extended warranties are frequently offered on items that are for your personal use only and they are similar to the add-on loan insurances often offered by businesses such as car dealers. Often an extended warranty is an unnecessary additional cost.
A business offering you an extended warranty must give you information about what extra protection it will give you on top of the existing protection provided by the Consumer Guarantees Act (CGA) but this doesn’t seem to happen very often.
If you do buy an extended warranty, it will increase the total cost of the item and if you are borrowing to buy the item your debt will increase. If the business is arranging a loan for your purchase they must comply with New Zealand’s lender responsibility principles and consider your borrowing needs and ability to repay the loan.
You have a five-day cooling off period after buying an extended warranty and you can cancel the warranty verbally or in writing. You can also cancel it at any time if the seller didn’t tell you everything about the warranty, even when the extended warranty has expired. In both situations you can get a full refund.
The item is probably covered by the Consumer Guarantees Act
In New Zealand items you buy from a shop or business that are for your personal or household use are usually covered by the Consumer Guarantees Act (CGA). That means your new kettle, phone, printer, TV, washing machine, bed, couch or any other item you buy for your household, should:
Work for a reasonable amount of time
Not break easily
Do what it’s expected to do
A product guarantee includes new and used goods sold by a business in New Zealand. If you have an item that doesn’t meet any of the three requirements above, you can expect the business to repair, replace or provide a refund for the item in a timely manner, even if there is no written warranty.
If you buy items from an overseas supplier, the CGA may not apply and even if it does, it will be difficult to enforce.
How long does the Consumer Guarantees Act cover items I buy?
“The CGA does not give a time limit. It says a product must last a reasonable amount of time.” Consumer Protection
You can expect an expensive product to last a reasonable amount of time without any faults or problems, and therefore that extended warranty may be a waste of your money. The reasonable life span of an item is varied and is influenced by factors such as:
cost
how much the item was used
if you followed the instructions
It wouldn’t be realistic to expect a relatively cheap item to last for many years, for example, an $89 printer. If it stops working after three years, it’s unlikely to be covered by the CGA or the manufacturer’s warranty. A quick online browse shows a printer at this price and the retailer offering 3-year product protection for $15.99. This increases the printer cost by a whopping 18%.
Debtfix doesn’t think this is a good deal, especially if the buyer is taking a loan and interest, fees or late payment penalties are added onto the sale.
What does a manufacturer’s warranty mean?
Some items include a manufacturer’s warranty at no extra cost and often has a time limit of one to two years. The manufacturer may offer repairs, replacements or refunds. Buyers are still protected by the CGA, which potentially surpasses any manufacturer warranty.
But the extended warranty includes accidental damage
Some extended warranties or product protection plans include cover if you accidentally damage the item. However, if you have contents insurance the cost of repairing or replacing household items accidentally damaged is probably already covered.
You may want to consider if the extended warranty is of value because you have a high excess or no general insurances.
What to do if you think a faulty item is covered by the Consumers Guarantees Act?
If you’ve bought something that breaks, is faulty or doesn’t do what it was meant to do you should go back to the business that sold it to you.
If you don’t get a reasonable solution you can get more support from Citizens Advice Bureau (CAB) or a Community Law Centre.
You may have a case to take to the Disputes Tribunal of New Zealand.
Contact Debtfix
If you have problem debts that include extended warranties that you didn’t fully understand, let the Debtfix Crew know and they’ll see how they can help you. Contact us now.