Extended warranties – are they worth it?

Money Advice Service

An extended warranty can sometimes be a form of insurance policy that covers you for repair costs after the manufacturer’s or retailer’s guarantee has expired. But are they worth the money? Extended warranties can be expensive, most new goods are made to a high standard and you already have statutory rights which give a high level of protection.

You’re covered already

The Consumer Rights Act 2015 is already on your side.

It says that goods should be of satisfactory quality, fit to do the job intended and last a reasonable length of time.

If you buy a new TV or washing machine and it breaks down within six months, you can take it straight back to the shop.

It’s up to them to prove that the appliance was not faulty when you bought it.

Under some circumstances you might be legally allowed to return goods up to six years after you buy them.

Although, this usually depends on whether you are able to prove that a fault was present when you bought it and that normal wear and tear wasn’t the cause of any problem.

Check the manufacturer’s and retailer’s existing guarantees

Before you think about paying for an extended warranty, remember that manufacturers often guarantee their goods for up to 12 months (and in some cases longer).

Plus, some retailers will top up the period of guarantee on top of that of the manufacturer – for free.

This can add up to five years total cover, and it’s all included in the price.

Credit card protection

If you pay by credit card, you’re automatically covered on any goods valued between £100 and £30,000.

The law says that the card company has to cover you if goods are faulty or not as described, or if they’re not provided under the contract – this is under Section 75 of the Consumer Credit Act.

Home contents insurance

Electrical and mechanical breakdown are not usually covered by your domestic contents insurance, but theft and accidental damage are.

So it’s worth checking the details of your policy – there’s no point paying twice to cover the same thing.

However, check whether your contents insurance policy needs you to pay an excess when you make a claim.

Many extended warranties do not.

Are extended warranties for electrical appliances value for money?

There are reasons why an extended warranty might not be, including:

  • most electrical goods and appliances are getting cheaper over time
  • they’re also getting more reliable, so you’re less likely to need a warranty
  • at the same time, repairing is getting more expensive as appliances get more complex – so it can be cheaper to buy new than repair
  • technology is advancing, so replacement goods are not only usually cheaper, but are often going to be better than the one you had before – perhaps more energy efficient and so cheaper to run, or with the latest features included in the price.

Which? carried out research about how likely a new TV or fridge or other appliance is to break down.

They discovered that most new electrical goods and appliances are actually very reliable and have a very low chance of needing repair in the first five years.

They also found that extended warranties for everyday appliances from some suppliers were expensive.

For example, the cost of an extended warranty on one £260 washing machine was £170 – more than half the cost price.

Treat extended warranties with caution – know what you’re buying

While some retailers sell extended warranties for electrical appliances and white goods, these warranties often have time limits for the repair.

This might be as long as four to six weeks, so you need to think about whether you would want to wait that long for your appliance to be repaired.

For example, could you manage without a washing machine for six weeks?

Some policies cover repair costs, but not all of them cover parts and labour, while others place a cash or time limit on claims.

So you have to read the details very carefully before signing up.

Some retailers also sell insurance for appliances you already own but which are not currently insured.

However, these come with lots of conditions and usually a ‘no-claim’ period immediately after the start of the cover during which claims for breakdown won’t be paid.

What’s more, some policies are really only ‘service contracts’ so are not regulated by the Financial Conduct Authority, or covered by the Financial Ombudsman Service.

That means if the retailer goes bust there’s no guarantee that your claim will be paid.

You can compare costs and features of extended warranties from a number of providers on the free Compare Extended Warranties website.

To get the most from the comparison website, you should enter:

  • the purchase price
  • the electrical item, for example ‘dishwasher’
  • how many years the manufacturer provides a warranty for.

You can then see results by price or how long the warranty is for.

Want to buy an extended warranty? Follow this checklist

  • Shop around – specialist insurers are often much cheaper than retailers, and multi-appliance deals can offer better value.
  • Check how long it will last and think about how long you are likely to keep the item.
  • Do the terms provide a new for old replacement if the item cannot be repaired?
  • Check the exclusions – do you have to use an authorised repairer?
  • Is there a limit to the number of claims you can make or the amount you can claim for? Does the cover stop once you have made a claim?
  • Read the small print very closely, especially for loopholes and exclusions.
  • Be careful of extended warranties where you pay monthly – over the long term these can work out to be very expensive.
  • Is it a service agreement, not a guarantee? These are not regulated by the Financial Conduct Authority (FCA) and therefore if the company goes under you have no legal protection.

Normally your legal rights allow you to cancel the warranty within 45 days after purchasing it and get a full refund under the Supply of Extended Warranties on Domestic Electrical Goods Order 2005 regulations (you can get a pro rata refund after that).

So, even if you buy one, there is still time to reconsider or shop around for a better deal.

This article is provided by the Money Advice Service.

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