In the run up to Father’s Day the electrical stores are spruiking like it’s Christmas. You can be sure that along with any of the hot deals from digital cameras to TVs will come one innocent –sounding question.
At the very point of sale when you’re about to hand over the cash for dad’s gift you’ll be asked “Would you like an extended warranty with that?”
It sounds simple enough. An few extra years’ “protection” for a hundred bucks or so, depending on the price of the item.
It might seem tight fisted to say no. Surely that’s a small price to pay to extended that one-year manufacturers’ warranty (the card in the box) to be covered for any breakdowns and mishaps? Well, probably not.
Hesitate and the salesperson, who’s likely on a commission for each such sale, may try harder. You may be given wrong and misleading information and might feel leaned on by being told the extended warranty can only be bought then and there.
The truths of the matter are: most new items don’t break down very much any more; consumers are already protected by laws which offer a warranty and the manufacturer’s own undertakings, and even if you buy extended cover it can be full of exclusions and conditions, which could prove frustrating.
A survey late last year by CHOICE and the NSW Office of Fair Trading found almost a third of respondents felt pressured into buying extended warranties on everything from washing machines and fridges to the latest digital whizz.
And only about half of said they understood the idea of their existing and 100% free consumer protection known as a statutory warranty.
Statutory warranties, also known as implied warranties, guarantee that certain minimum standards must be met for any product or service. One such proviso, “merchantable quality” basically means that it should do what it should reasonably be expected to do. It should also continue to do it for a reasonable amount of time.
CHOICE believes retailers should provide consumer-friendly information about the warranties. The likes of Harvey Norman and JB Hi-Fi and others could do this now or they could be encouraged by new laws.
If more consumers were aware of their rights they’d be better armed at the point of purchase to make an informed choice instead of being pressed to buy there and then.
Just as it is unreasonable to expect a consumer to decide whether to buy travel insurance on the spot, it’s also wrong to make the customer decide whether they need an extended warranty.
By offering you an extended warranty on the day of purchase but not later, retailers are exploiting consumers’ behavioural biases. People value something much more once they own it. We really don’t like losing something we own – we’re “loss averse”. And retailers know this.
We’ll pay much more than for an extended warranty than it is really worth for some perceived peace of mind. This form of what is essentially marketing means extended warranties cost more than they should, and the retailer gets a tidy cut of the sale.
Often extended warranties offer no extra value because you’d probably be covered by the statutory warranty anyway.
If consumers had more time to consider there would be less pressure to make on the-spot decisions. Consumers should be able to get a written quote for the extended warranty that is valid for 30 days. This would remove the pressure and allow people to shop around.
Changes to extended warranties are needed. They’re under consideration as part of a current Federal Government review.
With a bit of sprucing up and providing clear information we can revive this long-standing protection to boost consumer confidence, to say “no thanks” to an extended warranty and instead choose to trust in the law that says when a product breaks before you would reasonably expect it to (based on its relative value), then it’s the seller’s responsibility to refund, repair or replace it.
The changes aren’t going to happen overnight so this Father’s Day just buy the present and think more than twice about the questionable benefits of an extended warranty.
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