Extended warranties
Is it worth buying an extended warranty?
Fair Trading Act 1986, ss 36T-36W
Every product that you buy from a business will already be covered the Consumer Guarantees Act (see: “Automatic guarantees when buying from a business”).
Some products will offer manufacturer’s warranties, which are included in the purchase price. Manufacturers warranties guarantee that the maker of the product will repair or replace faulty products for a certain period.
Sometimes you will be offered an extended warranty, which you pay extra for. These should provide protections over and above what you’re already entitled to – for example, by extending the time period or by including cover for accidental damage.
If you’re buying an extended warranty, make sure that you are not just paying extra for protections that you are already entitled to under the manufacturer’s warranties, the Consumer Guarantees Act, and/or your own home or contents insurance.
You have the right to cancel your extended warranty within five working days and get your money back.
Example: Expired manufacturer’s warranty
Your washing machine broke just after the express one year manufacturer’s warranty expired. The Consumer Guarantees Act’s requirement of acceptable quality still applies and the retailer should pay for the cost of repairs, since a reasonable washing machine should last for longer than one year.
What information should be included with an extended warranty agreement?
The person or business offering you an extended warranty have a legal obligation to give you certain information. If they don’t, the Commerce Commission can fine them up to $2,000. They must make sure:
- the agreement is in writing. The wording should be clear, easy to read, and in plain language
- you get a copy of the agreement:
- if the sale is in person, you should be given a copy of the agreement straight away
- if the sale was over the phone, you should be sent a copy within the next five working days
- the agreement clearly states how much you have to pay for the extended warranty
- the agreement clearly states all the terms and conditions of the extended warranty, including:
- each side’s rights and obligations, and
- the warranty’s duration and expiry date (including whether or not it expires when you make a claim under it)
- the agreement is dated, and
- on the front page, the agreement includes:
- a summary of the rights, remedies, and automatic guarantees you’re already entitled to under the consumer guarantees act, compared with the protections offered by the extended warranty,
- a summary of your right to cancel the warranty (see below), and
- the name, street address, phone number and email address of the person or business that is offering the warranty.
Additionally, before you agree to anything, the person or business offering the extended warranty must also tell you verbally about your right to cancel the agreement, and how to do so. The verbal requirement only applies if it’s reasonably possible to do so (for example, if you buy the goods or services in person or over the phone).
Can I cancel an extended warranty agreement?
If the person or business offering the warranty (“the warrantor”) complies with their obligations (you’ve been given a copy of the extended warranty agreement and you were given all the required information), you can cancel the agreement but you have a time limit of five working days after you received the copy.
If you weren’t given a copy, or they didn’t comply with their obligations (see above), there is no time limit and you can cancel at any time. However, this only applies if their failure to comply was significant and caused you a disadvantage – if it was a minor failure, the five working days time limit still applies.
To cancel, contact the person or business offering the warranty (using the contact details given on your agreement) and let them know that you want to cancel the agreement. There’s no particular process or words you have to use.
The warrantor must then repay you everything you’ve paid for the warranty, in full and without any deductions.
Example: Cancelling an extended warranty
You buy a phone and pay for an extended warranty in case you drop it. You then realise that this is covered by your contents insurance. You can cancel the extended warranty as long as you do this within five days and get a full refund.
