TOO often consumers buy extended warranty without realising what exactly they are paying for. Many buy extended warranty for 'peace of mind' but end up with repair nightmares with probabilities that repair costs will be borne by you.
Every product purchased under hire-purchase (HP) agreement is expected to be of merchantable quality meaning that the product should be fit for its purpose, acceptable in appearance and finish, safe and durable. Normally, a manufacturer is required to provide this warranty which is known as "manufacturer's warranty".
Extended 'warranty' is sold by retailers and is applicable when the manufacturer's warranty period comes to an end. As such, it is the dealer that imposes the terms and conditions of the extended warranty. The common consumer understanding is that the extended warranty carries the same privileges of 'free of charge' repair or replacement on a product as a normal warranty would provide. Unfortunately, this common understanding is not really true.
In addition, the hire-purchase contracts are often in small print making it impossible for an average reader to read with comfort.
The recently launched hire-purchase report by the council reveals that 85 per cent of HP consumers knew that the goods they purchased were under some sort of a warranty. However, of the 85 per cent, only 72 per cent consumers were advised of this before they had agreed to purchase the item. 26 per cent of the consumers learnt of this when they had agreed to purchase the goods. In total, only 61 per cent of the consumers had been advised of the existence of a warranty before they purchased the goods. Given that 15 per cent of the consumers didn't know the existence of a warranty, suggests that a large number of consumers are not being advised on all their rights on the goods purchased. Some consumers don't get product specifications and warranty documents.
The report stated that 36 per cent of all consumers were asked by the seller to take an 'extended warranty'. At least 75 per cent of the consumers stated they were advised on the costs of the extended warranty plan and the benefits. However, none were given any specific product related document on extended warranty to read or to take away. About 51 per cent of the consumers, who were asked to purchase the extended warranties, actually bought these warranties.
These consumers received a one page fine-printed 'Terms and Conditions' of extended warranty. This document is common to all goods on which consumers took extended warranty. No consumer received any product specific extended warranty document. This is another reason why warranty details are not understood by consumers at large.
Presence of "exclusionary clauses" in extended warranty denies consumers the right to get a fair return for the money used in buying the extended warranty.
The council's research has found that the companies had between 15 to 20 exclusions. But no consumer was advised that the extended warranty is a dollar value warranty. This means that the maximum liability on the dealer is the purchase price of the item. Thus, though a consumer may have an extended warranty for two years and if the product required a number of repairs within the first six months of the extended warranty the cost of which totaled the price of the product, the remaining 18 months of the extended warranty already paid for by the consumer would be of no effect.
Each occasion the extended warranty facility is invoked, costs build up. These include cost of inspection, transportation, parts and repairs.
A consumer bought a twin tub washing machine with one year warranty provided by the manufacturer. In addition, he purchased an extended warranty for two years, which means that the product in totality had a three-year protection. After lapse of a year, consumer discovered that his washing machine was not operating as it used to.
When he contacted the supplier, he was informed that it cannot be repaired beause his one-year warranty had already expired and under his extended warranty, such parts were not covered. This was the first time the consumer was informed that extended warranty has limitations and restrictions. This information was never disclosed to the consumer when the extended warranty was sold to him.
The consumer then lodged a complaint with the Consumer Council of Fiji. The council found that the complainant was not given a proper extended warranty docket, and the paper did not state which parts were covered and which were not. After strong representation by the council, the supplier agreed to repair the washing machine and the consumer was given another three months warranty, which covered everything, including the parts.
Claims by dealers that certain parts are not covered when things fail during normal use of the product comes as a surprise, shock and obviously results in frustration for many. Unfortunately, these details are not revealed to the consumer at the time of purchase.
A potential worrying feature of the extended warranty business revealed in the report is that at least some dealers seem to engage their regular paid employees to sell extended warranties for a commission. The incentives provided to the employees over and above the normal wages compromises the integrity of the employees as white goods salespeople.
In a nutshell, extended warranty should be treated with caution. You must fully investigate all aspects of the extended warranty and what all is covered under the warranty before making your final decision.
* This is a weekly article from the council