What is an extended warranty?
Extended Warranty is a type of insurance, warranty or guarantee that is offered to specific consumers depending on their credit card type. It stretches the time of the warranty that the manufacturers already provide pertaining to the goods bought by the consumers. The warranty extends the already guaranteed Australian warranty that the government promises to every consumer in lieu of a new purchase. The consumers can purchase the extended warranty and still be eligible to sue to the manufacturer for any dispute or defect. However, there are different extended warranties that are available in the market which differ based on their guarantee durations. Extended warranty is generally similar to that of the Australian warranty, which means the Australian warranty is extended to the same length as it is. If the Australian Warranty is of 1 year than the extended warranty extends up to 1 year only, unless mentioned otherwise by the seller or retailer. Extended warranty does not applies when the Australian Warranty is of 5 years.
The Australian Competition and Consumer Commission (ACCC) is of the opinion that extended warranty is nothing but a waste of money that the consumers are compelled to invest in by the sellers. According to the Australian Consumer Law (ACL), every product has its own guaranteed period that is provided by every manufacturer by an order of the Australian Government. The commission says that every goods and services that are government approved, come with a guarantee, which protects the consumers from any probable defect in such goods or services. As per the ACL, an automatic consumer guarantee is applied to goods which the consumers purchases even without investing on extra extended warranties. The commission calls out to the common people and warns them not be fooled by the sellers as the goods are already warrantied under the ACL as ‘consumer guarantee’. The ACCC’s deputy Chairperson says that the extended warranties offer nothing extra that the Australian warranty does not. People are only mislead into buying additional warranties only for business gains. She is of the view that extended warranties provides negligible benefit and are not at all substantial. ACCC advises the consumer to be aware if an extended warranty claims to cover more than, that of the manufacturer’s or Australian warranty, the consumers need to get it in writing from such retailer. In such case, the retailer is liable to get the product repaired or replaced in case of any defect or dispute arises until the time the extended warranty covers the product. In addition to, retailers are liable to refund the consumers money if the product cannot be repaired or replaced. Failure to do so would attract penalty to the retailers, under the ACL. Additionally, a fine of $1 million is ordered against the sellers who misleads and deceives the consumer into purchasing extended warranties with false promises that does no good.
Opinions of the Australian Competition and Consumer Commission on extended warranties
The ACCC advises the consumers on several terms regarding ‘consumer guarantee’ and forms a guideline based on such advices. The ACCC advises the consumers to demand a confirmation in writing from the retailer pertaining to an extended warranty promise. The consumers should always preserve the purchase receipts, which is a proof of their purchase and the warranty promise by the seller. In case the goods has encountered some fault, the consumers are advised to take them to the retailer within the time specified in the guarantee/warranty card. Good quality products are less likely to encounter defect and has a better longevity; are therefore, recommended for purchasing by the government and the ACCC. The commission makes it very clear that the retailers or the warranty givers are not relieved of their duties even if the consumers have fixed their products by a third party. There is an option of refund or replacement if a defect is so severe that the product cannot be repaired. The consumer law empowers the consumer to escalate a matter and approach the above hierarchy, verbally or in writing, if the seller or his agent is not providing a suitable remedy. In addition to, if the consumer does not receive appropriate help from the retailer in any way, then he /she can get the help from Consumer and Business Services and file a complaint with the authority.
The ACL and the Commission has disseminate the fact among the consumers that they have the right to demand a repair from the retailer in case the goods has some defects. They can also claim for a replacement or a refund in case the defect is so that it cannot be repaired. It is however said that the consumers should use their sense of judgment and the value of the goods to expect the utility and longevity of them; it is immaterial to expect an inexpensive or flimsy product to last for a long time. The consumers are advised to judge wisely whether a products requires repair or replacement and approach the retailer for the specific purpose. The ACCC is of the view that consumers must be aware of the terms and conditions of the extended warranty to comprehend whether such extended warranty is providing anything extra over the Australian warranty, which is already attached to a newly purchased goods or service. In most cases, the consumers have always been deceive with the false promises guaranteed under extended warranty. Therefore, as far as the arguments against extended warranty goes, it is fair to say that they are not worth the money.
Advice to the consumer by the ACCC
On the other hand, many consumers are of the opinion that they have no clue about the function and procedure of working of the Australian competition and Consumer Commission (ACCC). No one really knows how ACCC operates and protects the consumers from the misleading and deceiving consumers applying the policy of consumer guarantee under consumer law. Researchers have held that the consumer law is ambiguous and dicey as it fail to provide a precise time bracket within which a consumer is liable to get remedy even after the warranty period has expired. Such drawbacks of the legislation makes the common people fall back to the trap of extended warranty. They pay out of their pocket on these extended warranties, which the government claims to be already providing. The extended warranty is however wasted most of the time as not all products encounter defect; still, people purchase additional warranty, as they are never sure about the functioning of the Australian warranty. Thus it is clear that consumers have major doubts in their minds while buying expensive goods as they are neither sure of their rights under consumer law nor about their functioning. It is also true that government bodies are always sluggish in implementing the laws and the consumers are required to bear a heavy expense in case of proceedings arising out of a dispute. People find it hassle-free to purchase extended warranties than investing time and money on commission or court proceedings. It is always wise to choose out of court settlement for such matters, as court proceedings are time-consuming and expensive. Therefore, many holds the view that extended warranties are worth the money and saves one from unnecessary hassle later. Its advantages are as follows:
- Expensive products and products with a purpose of being used for a long time is better guarded with an extended warranty for the extended warranty protects it even after the Australian warranty expires.
- Most of the time, the repairing charges and time taken are excessive for a consumer and therefore they choose extended warranties in addition to the manufacturer warranty. Repairing appointments are too lengthy and inconvenient. Thus, people choose extended warranties over the manufacturer’s warranty any way.
- Extended warranties saves consumers a lot of time, energy and money, which additionally secure the sanity and peace of mind as well. Extended warranties are more convenient as they come in varieties and offers easier policies than the Australian warranty provided by the government that has no implementation.
- Additionally, the consumers can buy warranties from any seller or retailer who sells extended warranty.
- Recently, there sellers who even offer extended warranties even after the manufacturer warranty has expired.
Conclusion
Extended warranties are seen as the medical insurance that is better when not used. It is believed to be better to exhaust a warranty than to waste time and energy on it. Nevertheless, when manufacturer warranty expires or fails to provide remedy to the consumers, extended warranty comes to the rescue. Considering the various pros and cons, a precise conclusion cannot be however, framed as to in favour or against extended warranty. It is still believed that they are a waste of money when the government already provides a ‘consumer guarantee’. Nevertheless, extended warranties are still unavoidable.
Articles/Books
Dong, Fang-qi, Zi-xian Liu, and Jie Yuan. “An Optimal Strategy Research for the Outsourcing of Warranty Repairs.” Proceedings of the 22nd International Conference on Industrial Engineering and Engineering Management 2015. (Atlantis Press, Paris, 2016)
Rahman, Anisur, and Gopinath Chattopadhyay. “Extended Warranty.” (2015) Long Term Warranty and After Sales Service. Springer, Cham. 67-77
Journals
Tarr, Julie-Anne. “Transforming insurance law: A comparative review of recent insurance law reform in the United Kingdom and Australia.” (2016) Insurance Law Journal 28.1: 10-22
Internet sources
Consumer Complaints And Queries | Australia.Gov.Au (2018) Australia.gov.au <https://www.australia.gov.au/help-and-contact/faqs/consumer-complaints-and-queries>
National Warranty Company Agrees To Change Extended Warranties (2018) Australian Competition and Consumer Commission <https://www.accc.gov.au/media-release/national-warranty-company-agrees-to-change-extended-warranties>
Money For Nothing On Needless Warranties(2018) Adelaidenow.com.au <https://www.adelaidenow.com.au/news/south-australia/millions-wasted-on-needless-warranties/news-story/c8cae04448f26c448615e16c01b8e821>
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