The Art of Warranties

Is an extended warranty worth your time?

By Luke Whitmore, 16th July 2010

Whenever you buy any item more expensive than a grape, you'll probably find a salesman trying to push an extended warranty onto you. Promises ring in your ears of how it covers you for all eventualities above and beyond the standard guarantee, and often you'll relent and shell out the extra cash to ensure that your shiny new consumer goods are protected against every possible misfortune that could befall them.

But it's often the case that extended warranties don't live up to the hype, having been practically forced onto you by commission-hungry sales staff who either don't know or don't care about the limitations and regulations of the policies they're selling.

As a result, many people sign up to warranties which limit the situations in which they're entitled to make a claim, forced to pay out for policies it's unlikely they could actually use. If you weren't talked through the exclusions and restrictions laid out in your extended warranty, it's likely that the cover included is less comprehensive than you think.

And in some cases, you might not have realised that your policy is so expensive that it would be cheaper to pay for any necessary repairs yourself than try to leap through the hoops of the manufacturer or retailer in question. So how do you figure out if an extended warranty is good value for money, how do you make use of one if you need it, and what do you do if you've already been sold one you don't want?

When considering an extended warranty, you should bear in mind that you might not even require one. The manufacturer's guarantee is not the only consumer protection in place when purchasing expensive goods - the Sale of Goods Act establishes that you have the legal right to get a free repair or replacement on goods which are not of "satisfactory quality" or wear out before a "reasonable" amount of time or usage. If you purchased a product which could reasonably have been expected to remain in working order for longer than it did, then you may be able to get it repaired or replaced even if it is no longer under the basic warranty.

If someone is trying to sell you a warranty on an electrical product and you think it may be of use to you, bear in mind that the retailer must obey certain rules and regulations relating to how they present the policy to you prior to selling. These rules are laid out in the Supply of Extended Warranties on Domestic Electrical Goods Order 2005, and you should ensure that the salesperson adheres to them.

The retailer is obliged to display the cost of an extended warranty in-store next to the goods in question, as well as letting you know that you have the right to purchase an extended warranty from another supplier instead, and that your household insurance may already provide coverage. They must also give you a written price for a warranty if you request it, and honour that price if you return within 30 days of purchasing the goods it covers - ensuring that they can't unfairly offer you a lower rate on the policy if you take it out immediately and don't shop around.

Extensive details about the warranty must also be provided, informing you of such vital information as whether the warranty will end if you make a claim, and whether the warranty is protected if the policy provider should go into administration. Perhaps most importantly, they must also give you the right to cancel your warranty - for a full refund if done within 45 days of taking out the policy and without making a claim, or for a partial pro-rata refund if you have already made use of it or you cancel outside of the 45 day grace period.

If you want to cancel your policy, you should write a letter to the retailer in question including the policy number of the warranty, the date you purchased it and how much it cost. You should also include the following paragraphs:

"I understand that The Supply of Extended Warranties on Domestic Electrical Goods Order 2005 provides for a 45-day cancellation period, during which consumers have the right to cancel and get a full refund.

I am hereby giving notice that I wish to exercise my legal rights and cancel my extended warranty with you. I have not claimed on the warranty and expect a full refund of my (£xxx) payment within 14 days."

Distance Selling Regulations may come into play if your warranty was taken out over the internet or on the phone. Under these rules, you have 14 days to cancel the majority of extended warranties purchased 'at a distance' - meaning online, through the mail or a fax, or on the phone.

So what if you have taken out an extended warranty, and now you want to make use of it? Furthermore, what if your attempt to claim on it is rejected?

The procedure for applying should be explained extensively within the warranty contract. You should make sure the problem with your product is covered - the small print and legal jargon can be confusing, so be certain to read it through closely. If you think you can claim for the issue you're experiencing, follow the instructions provided in the warranty document.

Hopefully, your warranty provider will accept your claim - but even if it is rejected, that doesn't mean you need to give up. If you feel that your problem is definitely covered by warranty, write back to the company. If they didn't give an explanation for discarding your claim, ask them why; if they did, you should describe why you think the fault should be covered.

Explain the details of the initial claim and the problem you have encountered, mention that they previously rejected it and then state the following:

"Having studied my contract I believe that the following clause clearly shows that I am entitled to repair or replacement for this item [insert relevant clause]/ there are no clauses in the contract that exclude this problem [delete as appropriate].

The warranty is a legally binding contract and as such you are bound by the terms and conditions and the obligations on you in that contract.

Please contact me within seven days either:

-      To arrange repair or replacement of this item. Or

-      To issue your final response so that I may refer this matter to the Financial Ombudsman Service/small claims court."

If the firm in question still refuses to resolve your problem in a satisfactory manner, you are now entitled to escalate your claim further. If your warranty is an insurance-backed policy, then the Financial Services Authority has the jurisdiction to determine what is permissible. In such situations, you can take your case to the Financial Ombudsman Service, who will deal with the company on your behalf. The FOS have found that a large number of extended warranties were not sold in an appropriate fashion and therefore entitle the consumer in question to compensation.

If your extended warranty is not insurance-backed, then you will have to take your case before the small claims court on the ground of breach of contract.

Retailers and manufacturers often try to make it difficult to make a claim or cancel your extended warranty, but armed with these tips, it should be less of a hassle to handle them.

Check out our free guide for more advice on extended warranties.

Claims Financial