Extended Warranties Mostly Sell You Rights the Consumer Guarantees Give Free

1. The position

In most cases, a buyer offered an extended warranty on an appliance or a piece of electronics at the counter should decline it. The consumer guarantees in the Australian Consumer Law already cover a faulty product for a reasonable time, whether or not any warranty was bought, and they continue to apply after the maker’s warranty has ended. A paid plan is worth considering only where it supplies something the law does not, and the main example of that is accidental damage.

That is not a fringe view. Asked whether an extended warranty is needed, CHOICE answers: “In most cases, probably not.” Consumer Protection WA and the NSW Government say much the same thing in their own guidance. The paid plan is optional. The legal protection is not.

The difficulty is that many buyers do not know this. A CHOICE survey published in 2023 found that 68% of respondents wrongly believed an extended warranty gives more protection than the Australian Consumer Law, and 70% thought no remedy was available once the manufacturer’s warranty had expired. Only 12% of those who bought in store said they had been told how the plan differed from their rights under the law. An offer made at the point of sale meets a buyer who, more often than not, underestimates what they already hold.

What follows is general information, not legal advice. A buyer with a particular dispute should contact the fair trading or consumer protection body in their state or territory.

2. What the consumer guarantees are

The consumer guarantees are automatic. They attach to the sale without being asked for, and a business cannot exclude them by contract, by a sign at the register, or by anything said at the counter.

The seller guarantees that the goods:

1. are of acceptable quality;
2. are fit for any purpose the buyer made known, or that the seller said they would be fit for;
3. match their description, and any sample or demonstration model; and
4. come with clear title, so that the buyer actually owns them.

The manufacturer carries guarantees as well. According to Consumer Protection WA, these include making spare parts and repair facilities available for a reasonable time.

Two practical consequences follow. First, a “no refunds” sign does not remove these rights. Second, WA states that a business must not mislead a buyer by “saying the consumer must buy an extended warranty to avoid losing these basic rights”. Any sales script that suggests otherwise is wrong on the law.

The guarantees also set out who chooses the remedy. Where a failure is minor, the business may choose whether to repair, replace or refund. Where a failure is major, the buyer chooses between a refund and a replacement, or may keep the product and seek compensation for the drop in its value. CHOICE explains this distinction in its guidance, and it matters, because a paid plan that only offers repair may give the buyer less choice than the law does for a major failure.

This article deals with appliances and electronics. Motor vehicles raise their own questions about servicing and manufacturer conditions, which are covered separately in logbook servicing, warranty and the fine print.

3. How long “reasonable time” runs

The consumer guarantees do not end on a fixed date. There is no list in the law that says a fridge is covered for so many years or a laptop for so many months. The question in each case is whether the product was of acceptable quality, judged against what a reasonable consumer would expect.

CHOICE identifies the factors that shape that expectation:

1. the type of product;
2. the price paid; and
3. how long a regular customer would expect a product of that kind to last.

Those factors come from the law itself. Section 54 of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010) provides that goods are of acceptable quality if they are fit for all the purposes for which goods of that kind are commonly supplied, acceptable in appearance and finish, free from defects, safe and durable, as a reasonable consumer fully acquainted with their state and condition would regard as acceptable. Section 54(3) lists the matters to be weighed: the nature of the goods, the price (if relevant), statements on any packaging or label, representations made by the supplier or manufacturer, and any other relevant circumstances. Durability is the word that does the work here. It is the reason the guarantees can run past the end of the maker’s warranty.

Most guidance stops there, with the phrase “it depends”. The regulators, however, have given concrete illustrations, and they are more useful than the phrase.

The first comes from Consumer Protection WA. It describes a $2,000 television with a 12-month manufacturer’s warranty that develops a fault at 18 months. The WA Commissioner’s position is that “consumer law will already protect the purchase because it is reasonable to expect an expensive TV to last longer than one year”. The maker’s warranty has expired. The buyer’s rights have not.

The second comes from CHOICE, which reports that ACCC guidance suggests a buyer could expect an expensive television to last more than two years.

Neither example is a rule for every television, and neither sets a figure for other products. What they show is the method. Price and product type lift the expectation, and an expensive item is expected to last longer than its warranty period.

A ruling on the rules of thumb

In consumer discussion online, three shortcuts circulate as if they were the test. None of them is.

1. The ATO effective-life table. That table exists to set depreciation for tax purposes. It says nothing about what a buyer is entitled to expect from a product under consumer law.
2. The length of the manufacturer’s warranty. The maker’s warranty is a commercial promise the maker chooses to offer. It sits on top of the guarantees and does not define them. The WA television example exists precisely because the two diverge.
3. “A court said X years.” Figures said to come from a particular decision are repeated widely. A decision turns on the product, the price and the facts in front of the court, and it does not set a general period for everything in the same category.

The test remains what a reasonable consumer would expect for that type of product at that price. A buyer who keeps that question in mind is better placed than one who relies on a number from any of the three sources above.

4. The overlap, worked (a hypothetical example)

The following example is hypothetical. The figures are chosen to illustrate the method and do not describe any actual product, retailer or plan.

A buyer purchases a fridge for $1,800. It carries a two-year manufacturer’s warranty. At the counter, the buyer is offered a plan that extends cover to the end of year five for $249. Because the first two years are already under the maker’s warranty, the plan in practice covers years three, four and five. That is $249 for three years, or $83 a year.

The useful question is not whether $83 a year sounds reasonable. It is this: for each of those paid years, would a reasonable buyer already expect an $1,800 fridge to be working?

Wherever the honest answer is yes, the buyer is paying for a second route to a remedy that the law already provides. The plan may offer a different claim process, a call centre or a fixed set of terms. It does not offer a right the buyer lacked.

Two findings from CHOICE sharpen the point. First, CHOICE reports that most extended warranties run for around two or three years from the date of purchase, which places much of their cover inside the period in which a fault would usually be the clearest case under the guarantees. Second, in its 2023 survey, 72% of those who had claimed on an extended warranty did so while the product was less than two years old.

CHOICE also offers a simple rule for the other end of the price range: compare the cost of the plan with the cost of replacing the item. A $20 plan on a $20 rice cooker makes little sense on any reading of the law.

5. Where paid cover can earn its price

There are situations in which a paid plan can add something the guarantees do not. Each of the following applies only if the plan document actually says so.

1. Accidental damage. This is the main gap. The consumer guarantees do not apply where the buyer “misused a product in any way that caused the problem”, according to the NSW Government, and section 54(6) of the Australian Consumer Law makes the same point about damage the consumer causes and abnormal use. A dropped laptop or a television knocked off its stand is not a failure of acceptable quality. A plan that genuinely covers accidental damage covers something the law leaves out. Many plans do not, and a buyer should not assume it.
2. A loan or replacement unit. The guarantees are framed around a remedy for the fault itself. A plan that promises, in writing, a working unit on loan while the original is assessed or repaired may be worth something to a household that cannot manage without one.
3. Home service or removal and reinstallation. For built-in appliances, the cost and inconvenience of removal and reinstallation can be significant. A plan that covers these clearly, in writing, adds practical value.
4. Avoiding a dispute. Claiming under the guarantees can involve an assessment, a discussion about whether a fault is minor or major, and a wait for repair. A plan with defined terms can remove part of the argument about what “reasonable” means for a particular product.

The last of these is the fair point on the other side, and it deserves to be stated plainly. In consumer discussion online, one group of buyers says they purchase extended warranties for convenience, not for rights, because pursuing a claim under the law can take time. That is a legitimate preference. It is, however, a payment for procedure, and the buyer should know that this is what is being bought.

6. Questions at the checkout

Drawing on the guidance from the NSW Government, Consumer Protection WA and CHOICE, a buyer offered a plan should be able to answer each of the following before agreeing.

1. Who provides it? It is often a third party, not the retailer.
2. When does it start? A plan may begin on the date of purchase, which overlaps the maker’s warranty, or only when that warranty ends.
3. What will a claim cost? Check for an excess, call-out fees, labour, and installation or removal costs.
4. What is excluded, and what are the limits? Look for claim caps, a limit on the number of claims, and whether accidental damage is in or out.
5. Is a replacement depreciated? Some plans pay less than the original price as the product ages.
6. Who can do the repair? Some plans restrict the buyer to particular repairers.
7. Can a claim cancel the plan? WA warns that “some claims during the manufacturer’s warranty could cancel the extended warranty”.
8. What is it called? WA notes that some plans are now sold as “product care” or a similar name. The label does not change what the document must be checked for.

The habit of reading exclusions before paying applies well beyond appliances, and the same discipline that suits travel insurance exclusions suits a plan offered at the register.

CHOICE suggests one question for the salesperson that covers most of the list above: “What protection does this give me beyond the ACL?” A clear and specific answer is a good sign, and a vague one tells the buyer to look harder at the document. In either case, NSW advises relying on the written document, not on what was said at the counter. The NSW Government also states that an extended warranty “does not replace your rights under consumer guarantees”.

The offer tends to come most often in the busy shopping weeks at the end of the year, which is a good reason to settle on these questions before going in.

7. When something fails

Where a product develops a fault, the steps are the same whether or not a plan was bought.

1. Go to the seller first, under the Australian Consumer Law. WA states that buyers hold their entitlements under the law “regardless of any extended warranty, and even if the manufacturer’s warranty has expired”. A seller who directs the buyer only to the plan, or only to the maker, has not answered the buyer’s legal claim.
2. Bring proof of purchase. A receipt is best, but CHOICE notes that a card statement can serve.
3. Escalate if necessary. If the seller does not resolve the matter, the next step is the fair trading or consumer protection body in the buyer’s state or territory.

A buyer who has already purchased a plan and now wishes to cancel it should read the plan’s own terms for any cooling-off or cancellation period. Whether one exists, and on what conditions, depends on the plan, and it should not be assumed to be available as a general legal right.

8. What the extra money should buy

The rights a buyer most needs when a product fails early are already included in the purchase price. They do not need to be bought twice. For the large majority of faults, the consumer guarantees provide a remedy for a reasonable time, and that time can run well past the maker’s warranty for an expensive product.

The extra money should therefore buy only what the law leaves out. Accidental damage is the clearest case. A loan unit, home service, or removal and reinstallation of a built-in appliance may also be worth paying for, provided the document says so in plain terms. Where a plan cannot point to anything of that kind, the buyer is paying for a second copy of rights already held, and the sensible answer at the counter is a polite no.

Sources: Do you need an extended warranty?, CHOICE (https://www.choice.com.au/shopping/consumer-rights-and-advice/your-rights/buying-guides/do-you-need-an-extended-warranty); 7 out of 10 people wrongly believe buying an extended warranty provides extra protections, CHOICE, 2 August 2023 (https://www.choice.com.au/about-us/media/media-releases/2023/august/extended-warranties); Consumer guarantees, Consumer Protection WA (https://www.consumerprotection.wa.gov.au/consumer-guarantees); Commissioner’s blog: Say ‘no’ to extended warranties, Government of Western Australia (https://www.wa.gov.au/government/announcements/commissioners-blog-say-no-extended-warranties); From the Commissioner: Extended Warranties, worth it or worthless?, Government of Western Australia (https://www.wa.gov.au/government/announcements/the-commissioner-extended-warranties-worth-it-or-worthless); Signing up for an extended warranty or care package, NSW Government (https://www.nsw.gov.au/legal-and-justice/consumer-rights-and-protection/be-a-smart-consumer/signing-up-for-an-extended-warranty-or-care-package); Consumer guarantees, NSW Government (https://www.nsw.gov.au/legal-and-justice/consumer-rights-and-protection/guarantees-contracts-and-warranties/consumer-guarantees); Competition and Consumer Act 2010, Schedule 2 (Australian Consumer Law), section 54, Federal Register of Legislation (https://www.legislation.gov.au/C2004A00109/latest/text)