Extended Warranty: A Hoax or a Truth

The study aims to discusses about extended warranty, ACCC’s view on it and the counter-argument regarding the topic. It also provides guidelines for consumers. Is extended warranty worth the money? Read on to find out.

Running head: EXTENDED WARRANTY: A HOAX OR A TRUTH
Extended Warranty: A Hoax or a Truth
Name of the Student
Name of the University
Author Note

1EXTENDED WARRANTY: A HOAX OR A TRUTH
Extended warranty
The study aims to discusses about extended warranty, ACCC’s view on it and the
counter-argument regarding the topic. Extended warranty refers to a warranty insurance benefit,
which is made available to particular credit card holders. It extends the duration of the
manufacturing warranty of the product or service purchased with such credit card. The extended
warranty cover stretches the manufacturer’s expressed Australian warranty on goods and
services purchased with an eligible or selected credit card. The warranty does not exhaust the
rights or scope of an extended warranty holder to prosecute against a manufacturer in case a law
is infringed under Australian Legislation. Extended warranties differ based on their different
time durations. The duration of the extended warranty generally matches with that of the
Australian Warranty, up to a maximum period of 12 months. It is not applicable when the
American Warranty is itself 5 years or above.
Australian Competition and Consumer Commission’s claim on extended warranty
Under the Australian Consumer Law (ACL), a new product comes with a guarantee,
which is of an acceptable quality. The ACL guides the people and calls out to them saying that
they should not be misled by suppliers as they already buy the warranty along with the product,
which comes under the theory of ‘consumer guarantee’ under Consumer Law1. Delia Rickard,
the Deputy Chairman of the Australian Competition and Consumer Commission (ACCC) is of
the view that the extended warranty offers nothing extra that the automatic consumer guarantee
1 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>.

2EXTENDED WARRANTY: A HOAX OR A TRUTH
or the Australian warranty provides with no additional cost to the consumers. She says that it
might just provide a little extra tweak additional to what the consumer gets out of the Australian
warranty, which is not at all substantial in nature2. The commission says that if a product is
guaranteed with a 3 years manufacturer’s warranty but the seller promises a warranty of 10
years, he is liable to put it in writing. In such case, the seller is bound to provide the after-sale
service and refusal to do would amount to breach of consumer law. The seller or the retailer
holds the duty to repair, replace or refund the faulty product even if such product does not have
an extended warranty, as it already bears an Australian Warranty that comes along with the
product, if the product is in returnable shape and condition. Moreover, it is claimed by the
Commission that faulty products, which are beyond manufacturer’s warranty are still eligible to a
remedy under the consumer law. Under the ACL, retailers or sellers who try to sell extended
warranties to consumer by befooling them with false promises are prosecuted under the
consumer law and may be liable to a fine over $1 million3.
The ACCC commission tries to educate the citizens of their rights and therefore lays
down the following guideline:
 The consumers are advised to ask for a written confirmation from the sellers regarding a
claim or a promise about an item’s longevity or performance made by the seller or by his
agents.
 The consumers are always advised to retain their purchase receipts, as that is the primary
evidence of a purchase and its manufacturer warranty.
2 Extended Warranties Not Worth It (2018) NewsComAu <https://www.news.com.au/finance/money/costs/why-
extended-warranties-are-not-worth-it/news-story/e806700959101b117f16d7c2657d67d3>.
3Money 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>.

3EXTENDED WARRANTY: A HOAX OR A TRUTH
 They must take back the faulty product to the seller within a reasonable time so that the
seller cannot reject it from repairing, replacing or refunding on the grounds of late
return4.
 The commission directs the Consumers to invest in branded expensive products for
essential goods, as they tend to last longer than cheap non-branded goods.
 The right of a consumer under the consumer guarantee is not exhausted even though they
had it fixed by a third party earlier.
 The consumers are made known about the fact that they can opt for a refund or a
replacement if the product is majorly faulty. However, they could get it repaired if the
fault is minor and it is repairable.
 If a consumer is not satisfied with the response of the seller or his agent, he is asked to
escalate the matter to the manager, orally or in writing.
 If the consumer is still not heard, in such situation he is advised to approach the
Consumer and Business Services or visit the online page of Consumer and Business
Affairs and file an online complaint5.
Extended Warranty: a hoax or a truth
It is been widely accepted now that if a goods has a fault, whether minor or major, there
is a scope to get it fixed, replaced or repaired, as the convenience of the seller or retailer. The
reasonable thing to expect in such cases is that depending on the cost of the product, one would
expect an expensive refrigerator to last long than a product bought from a pawn or dollar shop.
4Money 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>.
5Money 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>.

4EXTENDED WARRANTY: A HOAX OR A TRUTH
Therefore, they are meant to use their prudence on such matters whether to get a product repaired
or replaced. Consumer Watchdog, one of the regulatory body for consumer issues advises to
think and consider wisely before purchasing an extended warranty. It is recommended to read the
terms and conditions of a warranty insurance to check whether it is offering anything extra or a
better deal over the warranty provided by the Australian government already on the purchase of a
new product6. However, it is known to all consumers have had poor experience with extended
warranties. Thus, it can be fairly said that extended warranties are not worth the money7.
In the contrary, it is being argued that whether anyone have any idea about how the
Australian competition and Consumer Commission (ACCC) works or how it protects consumer
pertaining to the Australian warranty or the automatic consumer guarantee. As per Justin Oliver,
it has been observed frequently that the consumer law appears to be vague and ambiguous; like
the warranties state that a car owner is protected under the ACL for any minor or major issues for
a reasonable period of time, however it is not known to anyone what this ‘reasonable time’
would be. This is one of the biggest grey areas of consumer law, which do not specify the time
bracket of the warranty period. These shortcomings of the law compels people to opt for
extended warranties out of their own pocket, which also goes for a toss if the product does not
falter and works just fine for a long time. Therefore it can be said that the consumers face
dilemma while they invest in expensive products as they are either unsure of the rights they
already have or has no idea how such protective laws work for their benefit8. According to Julie
Anne Tarr, the practical implications of the laws are extremely complex, lengthy and expensive
6Consumer Complaints And Queries | Australia.Gov.Au (2018) Australia.gov.au <https://www.australia.gov.au/help-
and-contact/faqs/consumer-complaints-and-queries>.
7 Extended Warranties Not Worth It (2018) NewsComAu <https://www.news.com.au/finance/money/costs/why-
extended-warranties-are-not-worth-it/news-story/e806700959101b117f16d7c2657d67d3>.
8 Oliver, Justin. "When consumer goods turn bad: Mandatory reporting under the'Australian Consumer
Law'." (2014) Proctor, The 34.2: 18.

5EXTENDED WARRANTY: A HOAX OR A TRUTH
to chase for a redressal issue against a company as well. Thus, it is wiser for people to spend a
few extra bucks and get over-protection from the retailers, which save them time and money
approaching the ACCC later for remedy9. Common people would always find it better to cover a
matter by settlements rather than choosing to move the court for a disputed car or refrigerator.
Thus, choosing to purchase an extended warranty is found to be hassle-free, than to waste time
and sanity over the complexities of a government body that does not lay down its provisions and
proceedings clearly to the nonprofessional. Some of the many common pros of extended
warranty are listed below:
 Products that are purchased for a long term use are likely to be guarded with an extended
warranty so that it is protected even after the Australian Warranty finishes. An extended
warranty ensures a hassle-free and smooth maintenance10.
 The costs of repairing are more than the extended warranties. Moreover, repair involves a
lot of time which is wasted on servicing appointments that are inconvenient and tiring.
Therefore, it is normal for people to always look for something that takes lesser time and
effort.
 Thus, Stephan Corones mentioned that by investing in extended warranties, people
secure their expensive products and also secure their peace of mind in exchange of some
extra money. They can choose from the array of warranty insurance offered by different
retailers of particular industries11.
9 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
10 Rahman, Anisur, and Gopinath Chattopadhyay. "Extended Warranty." (2015) Long Term Warranty and After
Sales Service. Springer, Cham. 67-77.
11 Corones, Stephen. "Why Australia Needs a Motor Vehicle Lemon Law." (2016) UNSWLJ 39: 625.

6EXTENDED WARRANTY: A HOAX OR A TRUTH
 One of the most interesting facts of extended warranty is that consumers may purchase
the warranties not just from the seller from whom they bought the product, but from other
companies that offer lucrative and efficient warranty deals. There are varieties of
warranty insurances to choose from, nowadays.
 In recent times, there are many retailers who offer to provide extended warranty to the
consumers even after their original product warranty has expired. This has been a
common trend among sellers now, who not only pursue consumers to buy warranty for a
product whose insurance period is coming to an end, but also for product that has
exhausted its warranty period.
Conclusion
It is evident that most of the time extended warranties are never used and it is for good
that they are exhausted without being worried to make use of it for the product works absolutely
fine. However, for those rare times when the original warranty fails to cover for the loss of the
consumer, extended warranty comes handy. Nonetheless, it is still debatable whether extended
warranties are worth the hard-earned money of the consumers or not, yet it can be simply put as
compared to the medical insurance that we get for ourselves, hoping never to use them.

7EXTENDED WARRANTY: A HOAX OR A TRUTH
Bibliography
Articles/Books/Journals
Corones, Stephen. "Why Australia Needs a Motor Vehicle Lemon Law." (2016) UNSWLJ 39:
625.
Oliver, Justin. "When consumer goods turn bad: Mandatory reporting under the'Australian
Consumer Law'." (2014) Proctor, The 34.2: 18.
Rahman, Anisur, and Gopinath Chattopadhyay. "Extended Warranty." (2015) Long Term
Warranty and After Sales Service. Springer, Cham. 67-77.
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>
Extended Warranties Not Worth It (2018) NewsComAu
<https://www.news.com.au/finance/money/costs/why-extended-warranties-are-not-worth-it/
news-story/e806700959101b117f16d7c2657d67d3>

8EXTENDED WARRANTY: A HOAX OR A TRUTH
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>
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>