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Extended warranties: are you being ripped off?

02 Apr 15

Sales staff at big-box retailers including Noel Leeming, Harvey Norman and Smiths City have been promoting extended warranties with misleading claims, according to Consumer NZ.

A Consumer NZ mystery shop of the retailers saw sales staff falsely promoting extended warranties for ‘peace of mind’.

“Retailers argue it’s worth paying extra for an extended warranty because it gives you ‘peace of mind’ they’ll sort things out if a product is faulty,” Chetwin says. “But in most cases, you’re paying for protection you already have by law.”

Chetwin says extended warranties had been a lucrative sideline for retailers but the warranties were of limited value to most consumers.

The Consumer Guarantees Act requires goods to be of acceptable quality. “If they’re not, you’re entitled to ask the retailer to put things right,” she says. “You don’t need to buy an extended warranty to get this cover. Sales staff who claim otherwise are misleading consumers about their rights.”

The mystery shop saw a Smiths City sales rep claim the shopper would have to ‘fight it out’ with the manufacturer if a product developed a fault and the shopper hadn’t bought an extended warranty.

Chetwin says the sales member’s claim was wrong. “The Consumer Guarantees Act provides powerful after-sales protection. If a product isn’t of acceptable quality, the retailer has a responsibility to provide a remedy,” she says. “You don’t have to go into battle with the manufacturer.”

Chetwin says shoppers heading to stores this Easter should be wary of the extended warranty pitch when they are purchasing new appliances from these large retailers.

Consumer NZ last sent mystery shoppers into big-box retailers in 2012, and Chetwin says the extended warranty pitch had not changed much since then.

"Back then, sales assistants promoting extended warranties also failed to mention the rights shoppers have under the Consumer Guarantees Act,” she says.

Recent law changes mean anyone who buys an extended warranty now has a ‘cooling-off’ period of five working days to cancel and get a refund.

“Retailers have to tell you about this cooling-off period when you’re in the store,” Chetwin explains.

Smiths City, Noel Leeming and Harvey Norman outlets were included in Consumer’s mystery shop. Sales reps at the surveyed stores suggested an extended warranty to provide extra cover after the manufacturer’s warranty ended.

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