Push back on the warranty pushers

by , Chief Executive Consumer Rights 13 September 2013
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In the world of extended warranties, I can see why some salespeople might exaggerate the benefits of buying one, since it’s often their job to persuade you to purchase something that is, in fact, poor value.

Cartoon showing salespeople in shop

Over the years, Which? has consistently highlighted reasons why extended warranties are usually bad value.

For one thing, our surveys show that many products are so reliable that there’s a very slim chance you’ll ever need the warranty; for another, the price can be well on the way to the cost of a whole new product.

Extended warranties offer poor value

TV repairs and extended warrantiesA Currys premium five-year warranty on a 32-inch Panasonic TV costs £139. That’s half as much as buying the same model new.

Yet our latest investigation shows that only 2% of Panasonic TVs were repaired in the first five years – making it highly unlikely you’ll need to use the warranty.

Last year, we highlighted a £170 warranty for a washing machine that cost £260. In the past, we’ve shown how the cost of repairs was far less than the cost of the warranty. We’ve even found cases where the warranty costs about the same as the product itself – which is totally ridiculous.

Some of you tell us that you like warranties for the peace of mind and the convenience of getting repairs sorted out quickly. However, you won’t get repairs if the warranty doesn’t cover the cause

Some people will say anything to get a sale…

When we tested Currys/PC World recently, one member of staff told our researcher that its ‘Whatever Happens’ warranty covers everything. It doesn’t – anything deemed to be due to neglect, misuse or weather damage is ruled out.

It’s 10 years since the Competition Commission investigated the extended warranty industry, including hard-sell tactics, and concluded that the market wasn’t acting in consumers’ interests. That wasn’t the first investigation, either. An optimistic review in the mid-90s recommended self-regulation, which failed.

You may be surprised to hear that not all warranties are classed as insurance, so in some cases you don’t have the same rights as you would with insurance to complain or get compensation if things go wrong. We think it’s high time warranties were treated the same way, and we’re asking the Financial Conduct Authority to take action on this issue.

23 comments

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Stuart B

I worked at PC World many years ago.

The sales staff had two targets:

1) Product Sales
2) Extended Warranty Sales

From memory the second attracted bigger commission payments and was just as important as the first for a sales guy to hit.

Often the sales guy (when facing an unsure customer) would discount the product by the cost of the warranty – that way they still hit their targets.

I found some morals in the end and left.

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wavechange

I cannot remember ever having bought an extended warranty. In the 80s I recall telling sales assistants about Which? saying they were very poor value for money. Nowadays I would just tell them about my rights under the Sale of Goods Act, and they get the idea that I am not interested.

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Malcolm R

“Currys/PC World …..told our researcher that its ‘Whatever Happens’ warranty covers everything. It doesn’t – anything deemed to be due to neglect, misuse or weather damage is ruled out.” Surely you would not expect any warranty to cover these? Indeed, neglect can invalidate a claim on, for example, car and house insurance (and, in the case of a car, may lead to prosecution).

Providing extended warranties are not mis-sold – by pushing them onto the purchaser, concealing exclusions for example – then it is up to the purchaser to decide whether they suit them. I, in general, agree they offer no real value – checking the insurance cost against the item price usually gives a clear answer. However, as I reported elsewhare, I have recently bought one extended warranty – 10 years (actually 8 extra years) on a Miele dishwasher for all labour and parts costs, or replacement, for £149. Given the high cost of Miele parts I thought this offered reasonable value. Only time will tell.

Surely there is here an opportunity for a reputable insurer to offer repair insurance for all your domestic appliances at mutually-satisfactory rates, without the excessive commissions for shop staff? Is there anyone out there?

On the same tack, has Which? reported on 3rd party extended car warranties – are they fair and value for money? Peace of mind on a high value item is worth more than on a wahing machine.

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Colin

re “Surely there is here an opportunity for a reputable insurer to offer repair insurance for all your domestic appliances at mutually-satisfactory rates”

British Gas already offer this option under the HomeCare plan. Have had many a dishwasher repair and washing machine repair over the years. It is fairly expensive, but I am a happy customer.

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Malcolm R

Colin, which Homecare plan is is? I’ve looked at Homecare 400 that covers electrics, but does not mention appliances. That costs £204 a year.

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wavechange

I would like to see all domestic appliances covered by a manufacturer’s 10 year guarantee. If manufacturers were responsible for the cost of repairs during this time, poor quality products would soon disappear off the market because it would cost the manufacturers too much to pay for repairs.

To protect themselves from claims for appliances that have been heavily used, the warranty could cover 10 years or a specified number of hours use (which is easy to measure), just like a car warranty usually covers so many years or miles, whichever comes first.

I would like to see the length of manufacturers’ warranties as a factor in the selection of Which? Best Buys. Manufacturers and retailers need to know that the length of warranty provided helps provide customers with confidence and sell their products.

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Malcolm R

Whilst I agree (as said in other conversations) that extended warranties would be beneficial in supporting and promoting good quality manufacturer’s products, cheaper (and maybe less good) products could not be expected to last as long – certainly not 10 years. Either way, some failures would happen within the warranty period, and this would inevitably be at some cost to the manufacturer and passed on to the purchaser.

On the whole, though, as with cars and JLP TVs it’s high time warranties were better-related to expected trouble free life. Better components, quality control and design can achieve this, not necessarily at much extra cost. You would think it would be a “competitive advantage” but maybe it’s a case of who dares make the first move. It took around 100 years with cars.

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wavechange

Fair comment, Malcolm. If we assume that the main reason for failure is amount of use rather than age, an expensive washing machine could come with a warranty covering 10 years or a certain number of hours use. A cheaper machine might have a ten year warranty and half this number of hours use.

We cannot afford to carry on using up finite resources and creating waste at present rates, so consumers should be expecting products to last longer. Obviously that would not be appropriate for products such as phones, where the technology is developing fast and there is a big demand for the latest product, but most domestic appliances don’t really change much. Most faults occur during the warranty period, so I am not convinced that a ten year warranty is impractical, though manufacturers would have to stop using penny pinching and using cheap components, whereby failure of a small part often results in a large appliance being scrapped.

A ten year warranty would save consumers struggling to exercise their rights under the Sale of Goods Act.

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Malcolm R

Regarding phones, while some need or desirre the latest technology, others (many?) – like me – are quite happy with a phone that makes calls and sends messages. So my 7 year old Nokia does what I need.
One problem with more durable products is that it breaks the replacement cycle that drives industry and provides employment. Washing machines that last twice as long means you only sell half of what you used to – good for the environment but what do the staff and workers that are redundant do? I’m all in favour of durability, but there are economic consequences.

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wavechange

In a world with dwindling resources and mountains of waste, we owe it to future generations to build our appliances last longer. In the UK, we import most domestic appliances, but we could employ many people in doing repairs, and selling second-hand appliances, so the net effect on the economy could well be positive.

What’s wrong with people learning to fix their own appliances, which was common one or two generations ago? I’m still using a 31 year old washing machine that I bought in 1982. It has cost me about £100 in parts during that time. I am keen to keep it because it uses more water than modern machines, so rinsing is effective, and it is hot & cold fill, which is now uncommon in the UK. There is plenty of opportunity to run evening classes in home maintenance, so more employment opportunities.

I share your views on phones. My old Nokia 3510i would last 7-10 days on a charge, but sadly it became unreliable and its replacement manages only half that time. We are not typical, and most people want to replace their phones as soon as their contract ends, if not before. I can relate to that because I am happy to spend £1.5k on a laptop every three years, simply because the technology moves on so fast – unlike most domestic appliances.

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Johno Shaft

its the same for cars.

basically if you buy something and maintain and look after it, you won’t need an extended warranty for anything.

look at the fear used by warranty direct on their TV add, scandalous

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Malcolm R

I’ve had a gear box, alternator and a turbo fail on a well maintained car . A pump on my dishwasher leaked- pump replacement £350 + labour. Again, not something that could be maintained. These are the sort of items that extended warranties would cover. Even well designed and built products will have failures – the warranty simply spreads the cost of repair amongst all purchasers at a small individual cost and, like all insurance, gives peace of mind.

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william

I thought everyone knew to avoid extended warranties these, days, but I’m guessing from the comments they don’t. :(

Banks are slowing moving aware from target driven counter staff, isn’t it time that electrical stores do the same for their sales teams

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wavechange

I have not taken out an extended warranty but if I was offered an extra 8 years cover on a dishwasher for £149, as Malcolm was, I might just be tempted. Likewise, a family with half a dozen kids could benefit from an extended warranty on their washing machine.

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Lee Beaumont

Normally I buy EVERYTHING online. But when I needed a new laptop last year I had some PC World vouchers to use up so needed to go into store.

After about 30mins I found the Lenovo laptop I wanted and tried to pay. But I was forced into taking out some sort of extended warranties.

I was dying to get home and play with my new laptop so in the end agreed. But as soon as I got home i made a note in my planner to cancel the direct debit as I didn’t want it.

A few days later I did cancel the DD and no problems at all :)

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Chris IIWII

I have written a blog post in response to this post.

http://extendedwarrantycomparison.co.uk/which-co-uk-cheif-executive-on-extended-warranties/

In summary I do not think this post is working towards Which’s mission to make consumers as powerful as the organisations they have to deal with in their everyday lives. It is a propaganda lead article which make very blanket statement about a whole industry with well informed research.

I would love to get your feedback on my post.

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Malcolm R

Chris, I agree with comments you make in your blog. I have voiced an opinion before that some Which? conversations start with a rather overhyped tabloid-style introduction and an unbalanced appraisal of the situation. They seem to argue that it stimulates the conversation. I feel, however, that some conversations are more important than others – warranties and energy tariffs as examples, particularly when they develop into member polls. It is then vital to give balanced information otherwise the poll is distorted.
There are extended warranties that have merit – as you list. I would not normally take one up but did feel a Miele 10 year dishwasher warranty was worth having.
It would perhaps have been better if Which? listed relevant available warranties,or sites where they were listed, and gave consumers some guidance on the price at which an extended warranty becomes sensible – for example as a % of the purchase price per year.
I look to Which? for information that is not readily available elsewhere, and expect it to be fairly complete and unbiassed. Sometimes they let us down.

Hello Chris, thanks for your comment. The goal of Which? Conversation is to start a debate, without going into too much detail about the research itself.

This post refers to a wider investigation conducted recently by Which?, which is featured in the October issue of Which? magazine. The investigation involved our mystery shoppers visiting five major retailers to see how store staff were selling extended warranties and service/care plans at the point of sale.

This revealed that consumers were often not getting useful and clear information from high street retailers at the point of sale, and sometimes were not being informed of their basic rights when it comes to warranties. We think that retailers should make sure their staff provide accurate information so consumers can decide whether to buy an extended warranty. To read a more detailed summary of the research, please head to http://blogs.which.co.uk/technology/news/great-extended-warranties-rip-off/

We think that many extended warranties don’t offer value for money, and our investigation demonstrated this. Most products are already covered by a manufacturer’s warranty of one or two years, and the Sale of Goods Act gives consumers the rights to return a product if it develops a fault. Consumers can also often get more comprehensive cover through their home insurance policy, although this may increase premiums.

However, for consumers who do want to buy extended warranties, we advise them to always shop around to get the best deal.

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Malcolm R

Patrick, advice on what a best deal constitutes, and where it might be found is, I thought, one of the objectives of the Consumers’ Association. It would have been helpful to have applied this to extended warranties. I do take your point that the original Which? report focussed on pressure or incorrect selling of warranties and was going to point this out above – except this aspect was not part of the introduction to this conversation.

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llandl

What does everyone think of the new John Lewis 5 year warranty with all televisions?

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wavechange

That is great news. Of course, all suppliers should provide a 10 year warranty on TVs and similar expensive purchases

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Malcolm R

As far as I know it has been 5 years on John Lewis TVs for a long time – including sale TVs – at no additional cost.

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Chris IIWII

In addition to the five years they offer on TVs John Lewis have also started to offer 2 years guarantee on all electronic and electrical product.

http://extendedwarrantycomparison.co.uk/john-lewis-offer-2-year-guarantee-electronics-electrical-products/

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