|The Evening Times
|Let's Stop Rip-Off of Extended Warranties
||29 July 2004
The Government has launched a consultation on proposals to reform the sale
of extended warranties for electrical goods.
Changes should be introduced in time for the Christmas shopping season this
Today Julia Clarke of the Consumers Association welcomes the plans and says
shoppers are being ripped off to the tune of millions of pounds.
Extended warranties have been a huge problem for consumers for many years
and it is about time it was tackled seriously.
Hundreds of thousands of customers have lost a considerable amount of money
by taking out extended warranties when they do not have to and they turn out
to be useless.
We feel it is a big rip-off and we want it stopped.
It seems that every time you go into a store to buy an electrical appliance
you are approached about warranties and people often feel extreme pressure
is applied to purchase an extended warranty.
Most readers will be familiar with the Chewin' the Fat comedy sketch where
two salesman treat customers rudely when they refuse a warranty and many
have had a similar experience in reality.
I am sure the problem comes from staff being on commission for sales and
warranties that they successfully sell.
The problem is not only in electrical stores, but also in many kitchen
companies where the percentage of the total cost being spent on purchasing a
warranty is very high.
Often it is not made clear to the customer that they are actually buying an
extended warranty and it is not until later that people realise what they
are paying for.
There is a definite lack of transparency and we think the extended
warranties people are buying are not value for money.
A lot of electrical stores make huge profits on the back of warranties and
that is why they are so keen to push them.
The Competition Commission reported that the top five retailers, including
Dixons, Argos and Comet, pocketed more than £100million a year in profits
from warranties. This was found to be 30% more than should be expected.
In a Consumers Association survey we found a five-year extended warranty on
a £260 Hotpoint Washing machine from Powerhouse cost £210 while John Lewis
For a Sony television priced at £1150, Dixons charged £309 for a five-year
warranty while John Lewis gave the same deal for free.
We would tell people to think what it is they are buying.
The product will usually come with a manufacturer's guarantee of one year
but even after that customers are still protected by law.
And today electrical goods do not break down as easily as in the past. How
long will the average television last before it needs repair or it breaks
Customers will expect it to last longer than the length of the extended
And existing consumer law already protects customers, as goods purchased
must be fit for purpose and last a reasonable time relative to how much was
paid for the product.
So often people are being persuaded to part with their money for protection
that they already have for free under the Sale of Goods Act.
Even when accidental damage cover is used as a selling point it is not value
for money, as most people will have similar coverage with their home
And if not they can get it much cheaper than what is on offer from the
The changes that are being proposed by the DTI are sensible and should make
Stores will have to display the cost of the warranty alongside the goods in
store and on advertisements.
Some stores do this already but sadly they are few and far between.
Shoppers will have 45 days to cancel a warranty and must be provided with a
written reminder. They will also have the right to cancel at any time and
receive a pro-rata refund.
This is important for those who have bought a warranty without realising
what they have signed up to in store.
The extended warranty must be offered on the same terms for 30 days if the
consumer chooses not to buy it at the same time as the product. Any
discounts tied to the purchase of the extended warranty would also be
available for 30 days.
The store must inform customers about whether or not their warranty provides
financial protection in the event of insolvency.
This affects many people as there is no way of knowing what level of service
you are going to receive in the future.
Extended warranties are a multi-million pound business and these changes, if
they are implemented, will go a long way to ending the great rip-off. Quite
frankly we will be delighted to see the back of it.
But what people need to remember is the Sale of Goods Act is there and it
offers protection. If only more people would use it.
The best warranty is being aware of your rights and being prepared to demand