Extended warranties are under the spotlight again – this time the OFT is investigating their value for money. But do we really need a study to find out what we already know – that warranties are largely not worth buying?
Earlier this month, the Office of Fair Trading (OFT) announced it was going to launch a market study into the warranties sold with domestic appliances, such as computers, TVs and washing machines.
It wanted to find out whether its suspicions – that basically, they’re poor value for money – were true.
Look to Europe for answers
Well, it doesn’t need to do a market study to do that – all it needs to do is look to Europe. Over here, domestic appliances tend to come with a one-year manufacturers’ guarantee. Whereas in Germany, most domestic appliances come with a five-year manufacturers’ guarantee.
This simple fact explains why the extended warranty market in this country is worth well over £750 million.
To make matters worse, according to EU Directive 1999/44/EU, a minimum two-year guarantee should apply to the sale of all consumer goods everywhere in the EU.
Might the OFT’s time be better spent getting a government department to force product manufacturers to comply with EU law? There’s a little saying that I like to live by, which goes something along the lines of: doing the same thing over and over again and expecting a different result is madness.
What about the Sales of Goods Act?
It was only in 2008 that an OFT evaluation showed that ‘the Supply of Extended Warranties on Domestic Electrical Goods Order 2005, introduced to improve competition, was by that time only addressing around £19m per year of an estimated annual consumer detriment of £366m’.
How many more market studies and evaluations does it need to carry out before it changes tact, and does something effective? Let’s not forget that under the Sale of Goods Act you have a legal right to a repair or replacement if a product you’ve bought breaks down.
The Act states that goods must be of a ‘satisfactory quality’ and last a ‘reasonable’ amount of time. So, here at Which? we believe that, in most cases, extended warranties aren’t worth buying. Do you agree that they’re poor value for money, or do you feel more secure if you have bought one?