How not to be ripped off by junk warranties

You are about to shell out a lot of money so why not pay the extra to protect yourself - and your money - if the shiny screen goes zzzz and phut.

The dilemma has been brought into focus by the class action against JB Hi-Fi.

The lawyers bringing it, Maurice Blackburn, allege that "JB Hi-Fi extended warranties were of little or no value because customers already had the same rights for free under the Australian Consumer Law".

JB Hi-Fi said it would "vigorously defend the proceedings" and that it had "complied with relevant laws at all times.

When you buy something, in most circumstances, you automatically have a legal "consumer guarantee".

The Australian Competition Commission says this means product or service must be of "acceptable quality". It must be:

The ACCC adds: "When a consumer buys a product, the manufacturer or importer must provide spare parts and repair facilities for a reasonable time after purchase."

The federal government's advice to businesses is that they have to provide a remedy if the product or the service they sold is:

Pretty clear - but not completely.

There are some vague terms in Australian Consumer Law - like how long is a "reasonable time" for a product to be expected to last?

The ACCC says a court may use precedents in previous cases.

And the consumer advocacy organisation Choice has compiled a list of "How long should your household appliances last?" from fridges to ovens to phones to microwaves - the whole gamut.

If a product breaks within this "reasonable time", then you have a case for replacement or refund.

Warranties are extra promises above the legal guarantee. They come in many shapes and sizes, including express warranties, store warranties, manufacturers' warranties, money-back guarantees, store refund policies, store exchange policies.

You might be offered a warranty or an extended warranty which offers more guarantees about, let's say, servicing a product or supplying spare parts or fast technical support.

It is important to note that these warranties are extras not substitutes.

As the federal government puts it in its advice to businesses: "A business's warranty can't override the consumer guarantees. For example, if a product suffers a failure outside a warranty period, it may still be covered by consumer guarantees.

"If you're a supplier or manufacturer and provide such a warranty, under the Australian Consumer Law, you must comply with that warranty. If you fail to comply with a warranty, consumers have rights against you under the consumer guarantees."

Car dealers and manufacturers often offer a string of warranties.

Shell Australia offers advice on extended warranties which it says "are offered by the dealership and kick in once the manufacturer's warranty has ceased. Coverage generally runs up to five years and, depending on the policy, the cost ranges from a few hundred dollars per year into the thousands".

But be aware: "While a manufacturer's warranty is backed by the factory, extended warranties are sold by the dealer and administered by third-party operators. That means the cover you get could be completely different to your factory deal."

And if you do go ahead, Shell says: "With more and more carmakers now offering five, six, seven and even 10-year factory warranties, the appeal of an extended warranty is increasingly limited.

"Ultimately, it comes down to priorities. If what you're being sold does actually give you protections beyond automatic consumer guarantees and you're happy to pay for them, then sign on up.

"But don't be pressured into it. Do the research and ask the questions. If you think you'll just end up paying out good money for nothing, you can always say 'no'."

They may not be if they really do offer more than the "guarantee" already enshrined in Australian Consumer Law.

But Choice which offers advice to consumers is very sceptical.

"In most situations, extended warranties are not worth purchasing," Choice's director of campaigns and communications, Rosie Thomas, said.

"In fact, they often carry the same or weaker protections as people's existing legal consumer guarantee rights.

"Extended warranties exhibit many of the same qualities as 'junk insurance'. They're often forced onto consumers at the point of purchase by salespeople, with limited time for people to make a decision, and often offer little to no value."

Choice says you should ascertain whether the warranty actually gives any more protection than the cover you're freely entitled to under legal consumer guarantees.

You should also work out whether it saves you money. "Compare the cost of the extended warranty with the price of buying a replacement product yourself. If you bought a $20 rice cooker and the extended warranty costs $20, then you're better off bypassing the extended warranty."

And look for any extra charges if you make a claim such as a call-out fee for repairers.