An extended warranty-the solution for peace of mind?

The purchase of appliances is usually the culmination of a long research process, of many discussions and hesitation. You finally make a decision and believe to have made the best choice because the salesman praises the chosen model and manufacturer. But why does he offer you an extended warranty of four years on the spot if you are about to become the owner of a reliable and durable product? If you question the salesman on the life span of a refrigerator, a dishwasher, of a washing machine, he will mention 10 years and sometimes even dare to say 15 years for certain products. By discussing further with him, you will also make him admit quite easily that appliances that last 25 years just aren’t made anymore! Indeed, while being increasingly expensive, appliances are less durable and that is why they aren’t covered by five year warranties, but by basic warranties that don’t exceed one year or two in some rare cases. In these circumstances, does the purchase of an extended warranty represent a good investment?

What is an extended warranty?

Today, these extended warranties are nearly systematically offered to us. They are simply a service contract that stipulates that the manufacturer or the retailer promises to repair or maintain the product for the period of time written on the contract; this period obviously extends beyond the manufacturer’s basic offer. These types of warranties are sold separately from the product to which they apply and so they represent supplementary costs that are sometimes not negligible.

Attractive profits for retailers

Extended warranties attracted a lot of attention because they are apparently more profitable to businesses than to consumers. Citing a Consumer Reports magazine’s study, one can claim that the sale of extended warranty plans represents in certain businesses about 5% of sales, but 45% of profits! This profit is possible because appliances generally have a slightly longer life span than their coverage, so that a very little proportion of buyers has to prevail its reclamation right. We also evaluate that probable repairing costs are on average less than the costs of the warranty. For merchants, extended warranties don’t need an inventory anymore, any exploitation fees or delivery. So, as soon as it is sold, the maintenance plan or whatever they call it becomes almost a net profit automatically!

An unrecognized legislation that leans towards the consumer’s side

Often by ignorance, consumers have a tendency to give up to salesmen who put pressure on them for the purchase of an extended warranty plan and this, for just about any product on the market. According to Master Pauline Roy, consumer rights professor at the University of Montreal and one of the editors of the Loi sur la protection du consommateur (Law on the protection of the consumer), extended warranties “...are often useless and rarely necessary”. She adds that salesmen bet on our need of security when they try to sell us such protection plans.

They also bet on our ignorance because most of us ignore that there is an obligatory basic warranty in Quebec-the legal warranty. This warranty, included in the Law on the protection of the consumer foresees that all goods and services bought or rented must have a quality and durability proportional to the price paid. In return, the consumer has to respect the normal usage conditions and the expected dispositions of the contract. No matter what these salesmen will tell you, this warranty covers pieces and the labour says Jannick Desforges from Option consommateurs (Consumers Option).

Even concerning the length, the legal warranty is usually more advantageous than the extended warranty. No need of any agreement with the retailer or the manufacturer for the latter to be in force because it is automatic with any purchase, and this, even if the retailer would have specified by hand that the good isn’t guaranteed or even if you have a traditional warranty that turned out to be insufficient. According to Master Jean-Pierre Fafard, specialised consumer’s law lawyer, you can expect household appliances to fulfil their task for at least 10 years. Within this period, one shouldn’t have to get an extended warranty. So, by virtue of the legal warranty, if for example your refrigerator stopped working after three years, you could demand that the repairing costs go to the manufacturer or the retailer, and this even if you didn’t have an extended warranty. In the case where either would refuse to pay, you could present yourself in court for small claims and the judge would most likely agree with you.

Put your rights to work

However, Mrs Desforges notes that “the reasonable length considering the price” is important, but also imprecise. Moreover, at the exception of cheap cases where a repair would have been done and remade in two or three times on the same piece, the legal warranty isn’t equivalent to a refurbishment warranty. The involved parties will then have to consider the fact that the product has been used for a certain period of time and the compensation will then be made in function of the normal wear.

The law leaves a lot of place for interpretation and that is why putting your rights to work can sometimes represent a long and relatively strenuous process. The retailer or the manufacturer is likely to not react spontaneously to the invocation of articles 37, 38, and 53 of the Loi sur la protection du consommateur (Law on the protection of the consumer). Jean-Jacques Préaux, OPC spokesperson suggests the cheated consumer to firstly try to get a friendly agreement with the retailer. You should be armed with diplomacy and patience when you address the manager or the owner of the business. If the store is part of a chain, you should then contact the people at the corporate headquarters. In the eventuality where this enterprise seems like a deadlock to you, complain to the OPC offices that will be in the position to guide you through judicial resorts.

Choosing to opt for an extended warranty

If in the light of what you have just read, you still want get some peace of mind and limit your chances of having to resort to the judicial system, first of all, it is important to verify if the extended warranty that is offered to you is cautioned directly by the manufacturer or by a third business party with the retailer whose compensations will be assured by an insurance company. These two formulas are a lot more reliable and you will have more chances to honour your warranty than if you incur a simple extended home warranty offered directly by the retailer. The latter having indeed no other insurance than its word to honour its products. Secondly, if the extended warranty that is offered to you still seems like a wise choice, ask yourself a few questions before buying it: Of how many years does the extended warranty exceed the manufacturer’s warranty? If the latter is of a year and that the extended warranty if of two years, this means that you will actually receive one more year of insurance for the price paid. Depending on the reputation of the product, what are the chances that it will be lacking something? And finally, what would it cost to repair or replace the article yourself should the case arise. You might not want to buy an extended warranty if the repair or replacement costs are the same or inferior to the warranty’s price. However, if the repair is hard to do or costs a lot, the extended warranty can become advantageous.

But tell yourself that the consumer who buys a service plan or an extended warranty doesn’t exactly buy a peace of mind because these contracts usually have exclusions. So it is very important to inquire the salesman on the following:

• An explanation on the exact coverage that the warranty offers and ask that we furnish you this information written as much as possible. Are all the parts and the labour covered? Indeed, it sometimes happens that the warranty excludes certain parts that cost a lot or that break easily.
• Is there a franchise to pay in the case where the warranty should be used? If so, how much is it?
• Where are the repairs made? The product might have to be shipped, which causes longer waiting periods. Will you receive a replacement article during this period?
• Who will pay the shipping fees if the article must be shipped elsewhere for the repair?
• Finally, be sure to keep all the necessary documents for a claim and in case of uncertainty, inquire to the retailer about the amount of the purchase.

To conclude, the only advantage of extended warranties is that they are more easily respected in case of litigation, but is this advantage really worth letting retailers be enriched thanks to consumers? You still have unresolved questions? You will find the complete information on the legal warranty subject on the government of Quebec’s consumer protection office website:

http://www.formulaire.gouv.qc.ca/cgi/affiche_doc.cgi?dossier=3414&table=0&grappe

http://www.opc.gouv.qc.ca/publications/Dep_pdf/Garanties_garanties.pdf