Extended guarantees – are they a rip-off?

An ocean of appliances ' 26 million fridges, freezers and washing machines have been dumped in the past five years and most did not bother to see if they could be repaired
An ocean of appliances ' 26 million fridges, freezers and washing machines have been dumped in the past five years and most did not bother to see if they could be repaired

From broken bones to new beginnings

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It seems you can’t buy anything electrical these days without enduring the extended warranty hard sell before you leave the store.

I gave a PC World salesman short shrift when he tried to sell me one on a replacement laptop last year.

But now the manufacturer’s guarantee is about to expire, that hasn’t stopped them from bombarding me with offers trying to sign me up to a warranty costing almost 30 per cent of the purchase price.

About one in four people buy ‘peace of mind’ warranties, which typically cover the cost of repairs or replacements after the manufacturer’s guarantee runs out

The Office of Fair Trading (OFT) launched an investigation into the hard selling of these insurance policies in the spring.

According to them, the market for extended warranties is worth £1bn, which goes a long way to explaining my increased PC World junk-mail.

The OFT has now accepted undertakings from the likes of Currys, PC World, Argos, and Comet, to improve the way they sell their warranties.

Now you have to be told about alternative suppliers of guarantees as well as their own, and they’ve agreed to set up an independent web price comparison site, to help improve the competition.

The site is expected to go online in September.

Last December, consumer watchdog Which? joined me in waging war against extended guarantees, when they agreed they were ‘probably a waste of money’.

Their research, based on annual surveys of their members, revealed that there is roughly a one in 10 chance a major appliance will need repairing in the first five to six years.

They also came up with a number of examples of rip-off warranties, including a five-year offer on a washing machine costing £170, when the appliance was on sale for just £260.

A Streetwise local survey (see table) has confirmed that the price of many warranties varies widely and is vastly disproportionate to the cost of the product and the chance of it breaking down.

John Lewis shoppers were likely to bag the best extended warranty bargains. Dixons, Currys and PC World were far and away the most expensive.

Streetwise offers the following tips to readers thinking of buying an extended warranty:

· Check that the warranty starts after the product guarantee has run out, and the first year is not running alongside the manufacturer’s guarantee.

· Be sure what is excluded from the warranty. Are you covered for breakdowns arising from accidental damage for example, and does it include an annual check-up?

· Don’t assume all extended warranties offer the same protection. Use your new rights to shop around for the best deal.

· Even if the product does break down after the manufacturer’s guarantee runs out, you will still have a legal right to a repair or replacement, provided it’s not worn out and less than six years old.

· Paying as you go for repairs often works out far cheaper than buying an expensive extended warranty.

STREETWISE SURVEY

· Zanussi Fridge Freezer

– JOHN LEWIS

Price: £242

Five-year warranty: £60

– DIXONS

Price: £250

Five-year warranty: £155

– COMET

Price: £289.99

Five-year warranty: £105

Chance of breakdown within six years: 15 per cent

· Panasonic 46” 3D TV

–JOHN LEWIS

Price: £1,099

Five-year warranty: Free

– DIXONS

Price: £927

Five-year warranty: £329

– COMET

Price: £1,112

Five-year warranty: £319.99

Chance of breakdown within six years: Three to six per cent

· Hotpoint Washing Machine

– JOHN LEWIS

Price: £309

Five-year warranty: £129

– DIXONS

Price: £293

Five-year warranty: £239

– COMET

Price: £310

Five-year warranty: £174.99

Chance of breakdown within six years: 12 per cent

· Bosch Dishwasher

– JOHN LEWIS

Price: £283

Five-year warranty: £80

– DIXONS

Price: £283

Five-year warranty: £139

– COMET

Price: £320

Five-year warranty: £115

Chance of breakdown within six years: 11 per cent

NOTE: There is no clear information on exactly how many warranties are sold, and cover can vary considerably from one provider to another.