Extended Warranties: Are They Worth the Money?

Author: Martin Kovacs

Paying extra for an extended warranty may provide peace of mind at the check-out, especially when purchasing a big-ticket item, but before opting for added protection, it’s worthwhile weighing up a number of factors.

An extended warranty can represent a significant additional expense on top of the item being purchased, so it’s important to determine the actual extent of the coverage, and what protection it provides above the guarantees that already exist under consumer law.

In this guide, we’ll take a look at extended warranties and whether they’re worth the extra cost, consumers’ rights and the other protections available.

What is an extended warranty?

Extended warranties are offered in conjunction with a range of items, from home appliances to computers and smartphones. Usually, the greater the cost of the item, the more expensive the warranty.

As explained by the government’s Consumer Protection website, a manufacturer’s warranty is included in the purchase price of an item. Consumers can then pay extra for an optional extended warranty, which provides specific warranties or guarantees for a set period.

For example, a manufacturer’s warranty may provide cover for a product for up to two years; an optional extended warranty on the same item could provide cover for up to five years.

However, given the expenses involved with an extended warranty, it’s certainly worthwhile considering the specific protections that are being offered in the context of your rights as a consumer.

As Consumer Protection advises, an extended or manufacturer’s warranty is not usually needed for goods bought in New Zealand, unless a warranty offers more protection than consumers are already entitled to by law.

What is the Consumer Guarantees Act?

The Consumer Guarantees Act (CGA) is designed to protect consumers. It sets out a series of guarantees that apply to products purchased for personal or household use and consumer services.

It’s important to note that consumer rights under the CGA are applicable regardless of whether an item has a warranty. Consumer Protection advises that consumer rights under any other warranty are in addition to their CGA rights.

With regard to extended warranties, Consumer Protection advises:

“The Consumer Guarantees Act offers long-lasting guarantees on products and services bought for personal or household use in New Zealand. So, in most circumstances, buying an extended warranty probably isn’t worth the cost.”

For example, under the CGA, new and second-hand consumer products must be:

• Of an acceptable quality
• Fit for purpose
• Match their description

Does your insurance already provide coverage?

In weighing up what sort of value an extended warranty may provide, it’s also worthwhile keeping in mind your existing insurance policies. These may already provide cover under certain circumstances.

For instance, coverage could be provided by these types of insurance:

• Home and contents – cover for accidental damage under particular circumstances.
• Credit cards – may provide extended warranty cover when a purchase is made via the card.

It’s certainly worthwhile determining the specifics of any insurance policies you may hold, or are considering purchasing, to ensure you’re not doubling up on your coverage and costs.

Coverage for overseas purchases

It’s important to keep in mind that it could prove more difficult to resolve any potential product issues if you’re buying online from an overseas retailer. Doing your research before buying may help to avoid such issues.

In weighing up whether to make an overseas purchase, it’s certainly worthwhile comparing the warranty terms for comparable goods available in the local market, along with the protections that apply under the CGA.

It’s also a good idea to check the trader’s website for terms and conditions – including return, exchange or refund policies – along with their complaints process, and any consumer laws that apply.

Post-warranty: consumer rights

Even if a warranty has expired, consumers may still have the right to have goods repaired or replaced. This depends on a range of things, including expectations about how long a purchased item should last. If a purchase has been looked after according to the product’s instructions, it can be expected to last beyond the warranty period.

For example, if a new smartphone has a warranty for one year, this doesn’t mean the consumer should only expect it to last for 12 months. It’s reasonable to expect it to last several years if it’s taken care of.

Should an issue arise:

• Talk to the retailer first – if possible, take the goods back to the shop. Show the retailer what’s wrong, and explain their repair, replacement, refund and compensation obligations under the law. Consumers can also go to the manufacturer or importer to get the problem fixed.
• Complain in writing – if the retailer won’t fix the problem, contact the manager or head office. Outline the problem and what you’re requesting (keep a copy of the letter or email), and/or complain to the Commerce Commission.
• If still not happy – if you’re unhappy with the result of your complaint, you can make a claim to the Disputes Tribunal.

Are extended warranties worth it?

Whether an extended warranty is worth it will depend upon your individual circumstances. However, as outlined above, Consumer Protection advises that a warranty is not usually needed for goods purchased in New Zealand, unless it offers more protection than consumers are already entitled to by law.

If you’re thinking about buying an extended warranty:

• Carefully check what the warranty covers. Read the terms and conditions to check they provide the protection you require.
• Considering if the warranty offers extra protection not already provided by the CGA, such as cover for accidental damage. Remember, it’s worthwhile checking your existing home and contents insurance policy to see if you’re covered.
• Check whether the extended warranty expires once you make a claim, or if you’re covered for multiple problems.
• Before you buy, the seller must inform you about your right to cancel the warranty and how to cancel it (unless the warranty is a condition of buying a product on credit).
• Upon buying an extended warranty, you must be given a written, dated copy, setting out a number of details, including the total price and a comparison of protections offered by the CGA.
• An extended warranty can be cancelled by giving notice verbally or in writing within five working days of being given a copy of the warranty, or at any time (including after expiration) if full or complete disclosure was not given, with the seller then required to repay the full price.

Credit card coverage

As mention above, a number of credit cards cover purchases made on them – this can range from insurance for theft or damage, to fraud and extended warranties. For example BNZ Platinum cards offer an extra 12-months extended warranty on top of a manufacturer’s normal one- to four-year warranty, or double a six-month warranty. They also offer 90-day insurance on new goods purchased using the card, covering loss, theft or damage.

So if you’re making a big purchase and are considering getting an extended warranty, it might be a better idea to change your credit card instead, especially if you can take advantage of an introductory low-interest rate. If you’d like to read more about the protection afforded by some credit cards, read our story How to Use a Credit Card to Your Advantage.

Of if you want to check out the different credit cards on the market, just click on the button below.

 Compare credit cards with Canstar!