Worthless warranties warning

Worthless! That’s how the Commerce Commission sees extended warranties on appliances and electronics like TVs, fridges and stereos.

Actually, I’ll quote it a bit more fully from its Consumer Harm report that I got using the Official Information Act:

‘‘This group (domestic appliance retail stores)… have increased profits by selling worthless addons such as extended warranties that run concurrently to Consumer Guarantees Act rights.’’ It’s a brilliant business model. The Consumer Guarantees Act means that retailers are responsible for fixing stuff they sell which isn’t of adequate quality.

Adequate quality for a TV, washing machine and stereo means to me that under ordinary use, they should last for years and years. If they break down then the retailer needs to take responsibility and fix it or it is not reasonable quality.

If you buy a music system, you are likely to be offered an extended warranty of one, two, or three years.

In my book, none of those periods is an acceptable time period to have problems.

But if I bought a Sony Micro System for $258 at Harvey Norman, a two-year warranty would cost an extra $49. Three things strike me about this.

First, $49 is a lot of money and it is better kept in your pocket.

Second, insurance that costs $24.50 a year indicates you are running a very, very low risk of finding yourself needing to make a claim.

Third, insurance is for risks you can’t afford to run.

These are ‘‘catastrophic’’ risks, risks that would cripple you. Your stereo not working is not one of those.

Unless consumer appliances have become astoundingly badly made in the past 20 years I see no value in extended warranties and concur with the commission’s view.

In fact, I’d go further. No guarantee should be allowed to be sold that covers the first year of an appliance’s life.

I have one of those old black stack stereos from the 1980s in the corner of my lounge. It works great. It is excellent for the kids to play all their Famous Five CDs on. In the bedroom, I have one of those CD/tape players from the 1990s.

They have a combined resale value of no money but have saved me heaps by not having to buy a new sound system.

It helps that music really hasn’t moved very far for me since Kate Bush’s Hounds of Love so I don’t find myself constantly hankering for new music – and new ways of playing it.

But the key point is that they are both still working. And, amazingly, the mix tapes that have somehow survived from my teen years still play.

I expect durability from the appliances I buy now.

It is an article of financial faith with me never to accept an extended warranty, a belief that was cemented last year when I bought my eldest an iPod. The shop tried to sell me an extended warranty for it.

When I laughed, they said they could do the warranty for half price.

That indicated to me that there was far more profit in that warranty than was justified at best and that as insurance it was a joke.

Some risks I will run myself, such as having a fight with a retailer to fix an item that has broken down unacceptably soon. I will self-insure by leaving the money in my bank account.