Extended warranties on electrical goods can be confusing. You’re about to buy an appliance in NZ, and then the sales person asks if you would like to take an extended warranty to give you additional protection should anything go wrong with your new purchase.
What do you do? Many perplexed customers pay the extra money to give themselves peace of mind. After all, you reason, what would happen if it blew up, and you had to buy another one?!?
Unfortunately, it turns out that this is not actually the best course of action.
Electrical appliances from reputable brands now come with a 1 to 2 year manufacturer’s warranty as a matter of course. The warranty usually covers the costs to repair or replace your appliance should anything go wrong with it. The only exclusion to these warranties occurs when you have caused damage through not using the appliance according to the manufacturer’s instructions.
Many retailers now offer consumers what is called an “Extended Warranty” which can provide you with 5 years warranty protection (i.e. 3 years on top of the manufacturer’s warranty period). The cost of the warranty will vary with the price of the appliance, but here are some examples; a Panasonic microwave priced at $249, can come with an extended warranty for a cost of $99. Similarly a Fisher & Paykel $999 washing machine will cost $149 for an extended warranty. If you were to take up either of these options, it would add from 15% to 40% to your total bill.
According to the Consumers’ Institute, if you are buying an appliance for private use (i.e. not for business purposes), then they recommend that you should not take an extended warranty. This is because you are already protected under the Consumer Guarantees Act, so that even if the appliance fails after the manufacturer’s warranty expires, provided the appliance is still reasonably new and you have not abused it, you will still be entitled to have the appliance repaired, replaced or your money refunded.
Don’t forget that you have additional cover for your appliance through your home and contents insurance policy should accidental damage occur.
We would recommend that rather than buy an extended warranty, you take that money and set up a “Depreciation Account” so that you will have funds available to replace your aging appliances in the future.