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Simon warns about extended warranties

By johnboy 16 January 2013 45

Simon Corbell is warning that extended warranties are mostly rubbish:

“Fair trading agencies across Australia have raised serious questions about the value of extended warranties, and whether they offer any greater protection than that already provided by the Australian Consumer Law (ACL).

Most consumers are offered an extended warranty, particularly when purchasing electrical equipment or whitegoods and for a fee this warranty can be extended beyond that provided by the manufacturer.

Mr Corbell said that in almost all cases consumers were already protected by consumer guarantees or ‘statutory warranties’ under Australian Consumer Law.

“Office of Regulatory Services inspectors will be surveying extended warranties in the market place in the coming months and assessing whether they measure up to the ACL and any claims made by retailers,” he said.

“In the meantime, consumers considering any extended warranties should ask what they offer above and beyond their existing rights, and decide if they are worth the extra money.”

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Simon warns about extended warranties
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screaming banshee 10:27 am 19 Jan 13

Insurance is for things you couldn’t afford to replace/repair out of pocket. If my MacBook dies once out of warranty and the cost to repair is more than a quarter of its original value I’ll just buy a new one.

c_c™ 1:32 am 19 Jan 13

Flippant said :

They way I see it, it is insurance, if your product breaks it will save you money, if your product doesnt break you have spent your money, You dont buy house insurance hoping your house burns down….. you buy it just incase it does.

If I bought a $600,000 TV, sure I’d pay $150 for warranty!

c_c™ 1:16 am 19 Jan 13

Comic_and_Gamer_Nerd said :

Link?

Look it up yourself. Apple AU website would be a good start.
But if you didn’t already know this stuff, you obviously weren’t an informed customer in choosing to buy AppleCare, are in no position to say it’s an essential purpose. Fool + money = soon parted.

RedDogInCan said :

Any product that they are willing to discount by 25% without any haggling obviously has a pretty healthy profit margin!

Extended warranties are almost entirely margin. On many big ticket items now like televisions and laptops, warranty is where the profit comes from, not the product itself (due to heavy discounting). At Harvey Norman, the warranty firm is actually owned by Harvey Norman itself, so pure profit, while others like Good Guys contract it out. Either way, bulk of the money is margin for the retailer. Only a small fraction goes to the warranty ‘policy’.

thatsnotme 11:45 pm 18 Jan 13

Flippant said :

Its good to see that Simon Corbell doesn’t have anything better to do with his time than to kick retailers in the guts when they are already down, retailers are struggling to survive and he decides to create a witch hunt to make it seem like they are ripping people off.

What a joke, isnt there anything better he can do that will actually make a difference to Canberra.

I used to work in an electrical retailer and it really annoys me when people rubbish extended warranties, I buy them personally on purchases and occasionally they come in handy.

They way I see it, it is insurance, if your product breaks it will save you money, if your product doesnt break you have spent your money, You dont buy house insurance hoping your house burns down….. you buy it just incase it does.

If you wanted to make a ‘statutory warranties’ claim and the retailer didnt want to come to the party then your only legal option is to take them to small claims court, pay the lodgement fee which im sure is a couple of hundred dollars then wait to have your case heard which can take months… and in the end that decision is made by a single judge and can go either way depending on how they feel on the day, as the ‘statutory warranties’ under Australian Consumer Law is a very grey area and has been written that way so that it is open to interpretation.

What you are paying for in an extended warranty is assurance that it will be fixed or replaced as quickly and hopefully as painless as possible.

Someone also made a comment regarding commission on warranties, yes you are right salespeople do recieve commission on them as well as everything else they sell, which i hope comes as no shock to anyone…
I also hope that the same people are not shocked to hear that real estate agents get paid a commission as do car salesmen.

Biased much?

Also, saying your only recourse if you make a claim and the retailer doesn’t want to know about it is small claims court is bullshit. In the ACT, the Office of Regulatory Services deals with Fair Trading, and if you’ve tried to resolve your dispute with the retailer and failed, you can lodge a complaint with them. Jumping straight to small claims court isn’t necessary.

And please…comparing extended warranties to insurance is ridiculous. With some exceptions, insurance is about protecting yourself from accidents and disasters. Warranties are about being protected when at item that shouldn’t break, does. You shouldn’t have to buy extra protection just to make sure that something you’ve spent a lot of money on actually lasts a reasonable amount of time.

RedDogInCan 9:37 pm 18 Jan 13

Flippant said :

If you wanted to make a ‘statutory warranties’ claim and the retailer didnt want to come to the party then your only legal option is to take them to small claims court, pay the lodgement fee which im sure is a couple of hundred dollars then wait to have your case heard which can take months… and in the end that decision is made by a single judge and can go either way depending on how they feel on the day,

Pretty easy to see which side your bread is buttered on…

Taking a retailer to the small claims court is simply. Yes, you pay a small lodgement fee but that fee plus any other costs are added to the amount claimed. The judge however doesn’t make arbitary decisions – their default judgement is always with the claimant unless the defendent presents a solid case against the claim, in which case it is decided on its merits. And the good thing is that the sheriff will enforce the judgement for you.

I recently overheard the following conversation between a salesperson and a consumer:

SP: I would recommend taking an extended warranty on that item.
C: How much is it?
SP: $75 for three years.
C: No thanks.
SP: What about $60?
C: Err, no.
SP: I could do it for $50.

Any product that they are willing to discount by 25% without any haggling obviously has a pretty healthy profit margin!

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