From the holiday crunch to Boxing Day sales – the retail period between November and January is huge. In fact, despite the current cost-of-living crisis, Australians spent nearly $24 billion over this period in 2023-24.
During this purchasing frenzy, many consumers also find themselves buying extended warranties for their newly acquired electronics and appliances. Sometimes even spending quite a bit of money. But are extended warranties worth it? Are they really worth the additional cost?
In this article: Are extended warranties worth it?
- What are extended warranties?
- JB Hi-Fi extended warranty case
- Extended warranties are often misrepresented
- You may be paying for protections you already have
- Australian consumer law protections
- Advice for consumers
What are extended warranties?
Most of us know what extended warranties essentially are. They’re simply products where you pay a fee to a warranty provider who agrees to repair (or replace) a good or components of a good in certain circumstances and for a certain period of time.
Generally this kind of warranty is designed to cover gaps, or extend the timing, in an existing warranty or with the guarantees given under Australian consumer law. However, this isn’t always the case. When it’s not, the warranty may not be worth the paper it’s printed on. And depending on the circumstances the warranty provider could be considered to be misleading their customers.
JB Hi-Fi extended warranty case
This question – are extended warranties worth it – has gained prominence in light of the recent lawsuit against one of Australia’s largest home entertainment retailers, JB Hi-Fi. In this class action case the group of consumers alleged that JB Hi-Fi engaged in misleading practices by implying that the benefits provided by the extended warranty were in addition to the rights already available under Australian consumer law.
However, the consumers believe that the extended warranties had little to no value because the consumers already had the same rights under Australian consumer law.
Extended warranties are often misrepresented
The JB Hi-Fi extended warranty is not the only one that could be potentially worthless. One expert from the consumer group, Choice cited by the ABC, believes that ‘extended warranties “very rarely” offer value for money.’ She also found that in 71% of the instances where a consumer is offered an extended warranty, the rights under that warranty were misrepresented to the consumer.
You may be paying for protections you already have
In the case of the JB Hi-Fi extended warranties at issue, one of the problems is that the warranties didn’t give value for money. The warranties themselves tended to last between two to six years after purchase. However, Australian consumer law remedies would last longer in most cases.
In those situations, consumers might find themselves paying a significant amount of money for something that, in practice, they already have.
Australian consumer law protections
Before you spend your hard earned money on an extended warranty, you need to know what you’re paying for. And to understand that, you need to know what you’re already entitled to under Australian consumer law.
The Australian Competition and Consumer Commission (ACCC) regulates consumer guarantees. When selling any product, businesses are legally bound to provide an automatic guarantee. This guarantee ensures that the product or service will function as expected and be true to all advertising claims. That means that all products must be:
- of acceptable quality
- match their description
- fulfill any express warranties
- be fit for their intended purpose
An express warranty, for example, could be a claim that a table can support up to 100kg. If you buy a table after being given such a promise, but then the table fails to live up to the promise, you will have the right to a repair, replacement or refund.
It’s important to recognise that consumer guarantees can apply beyond the manufacturer’s warranty period. But whether or not they do depends on various factors. These might include the time elapsed since purchase, the type of product, the expected manner and duration of its use and the amount of use it can reasonably withstand before a failure is expected.
When a product fails due to faults, departs from its descriptions or fails to perform as promised by a salesperson, then the business is legally required to offer a remedy.
Again, this is all contained under the ACL. You don’t have to do anything or buy any type of warranty or extended warranty to get access to these guarantees.
Advice for consumers
What does all this mean for you? The JB Hi-Fi extended warranty lawsuit gives us a critical reminder to question the real value of extended warranties. Before you purchase any extended warranty, think about the following:
- What are your rights under the ACL? Do you know your rights under the ACL? If not, find out what they are first. Ensure you’re getting something more from any extended warranty you purchase.
- How reliable is the product? Research the product’s track record before you buy. Some have a lower risk of failure. So even if an extended warranty is giving you more than the guarantee under the ACL, in this case it might not be worth it.
- What’s in the fine print? You need to understand the terms, conditions and, importantly, the exclusions in any extended warranty.
- What do you get under the manufacturer’s warranty? This might be enough for your needs.
- How much does it cost? If the extended warranty costs a fair amount of money, think about the costs of replacing the item if it fails. Depending on the comparison costs, it might not be worth it.
You should also remember that many salespeople get commission on extended warranty sales. And even if they believe they’re telling you the truth when it comes to what the warranty offers, they aren’t lawyers. They simply might not really understand the law in this space.
So, it’s a good idea to really understand what you’re buying before you make that purchase. If you need any specific advice, or you believe that a retailer has misrepresented an extended warranty to you, get in touch. Our team can help you get a remedy!
