Trading is advising them to think first whether extended warranties
give good value for money.
repairs, and accidental damage. They can cost up to half of the
purchase price of some appliances, for example computers, stereo
systems, washing machines or fridge freezers.
Consumers should think carefully before buying an extended warranty.
Leaflets are being distributed in shopping centres posing the
- do I need more time to make my decision?
- do I need this - or am I already covered?
- what are my alternatives? For example, using a local repairer if an
item breaks down.
Last year the extended warranty market on 'brown and white goods' was
worth around£800m. This figure is expected to reach£1bn
Research conducted by the OFT indicates that customers can feel
pressurised to rush to a decision to buy an extended warranty when
they buy their new appliance. A high percentage of consumers had not
thought about buying an extended warranty before they arrive at the
store. Buyers should think whether extended warranties offer them
value for money. OFT research found that the average washing machine
repair costs between£45 to£65. So if a five year extended warranty
costs£150 on a£300 washing machine, it would need to break down
four times for a consumer to benefit.
A recent WHICH report highlights that modern domestic appliances are
generally reliable. It found that 81 per cent of washing machines
didn't break down at all in the first six years.
The OFT also reminds customers that they may already be covered
by law, or by their home contents insurance.
Some sales staff are paid commission on each extended warranty they
sell, so may be keen for a customer to sign on the dotted line. John
Vickers, director general of Fair Trading, said:
'Many people buy extended warranties as an afterthought. Our message
is: think before you buy. Don't feel under pressure. Think whether an
extended warranty is good value for you, and if it is, think where
best to buy one.'
The Office of Fair Trading has referred the question as to whether
competition is working in the extended warranty market to the
Competition Commission, which is investigating and due to report to
government next July.
1. The OFT has published a leaflet 'Extended warranties: think before
you buy' which will be available at trading standards offices and some
shopping centres and libraries. It is also available, free of charge,
from the Office of Fair Trading, PO Box 366, Hayes UB3 1XB or
telephone 0870 6060321.
Click hereto download the leaflet.
2. The OFT referred the market for the supply of extended warranties
on domestic electrical goods to the Competition Commission following
a study by the markets and policy initiatives division of the OFT.
The study, publishedon 2 July 2002, found that competition in the market did not appear to be working effectively and that consumers were not adequately informed or protected.