Argos, Comet and Dixons vow to fix extended warranty market

The three largest extended warranty providers have vowed to demystify the £1 billion market after an investigation revealed customers are not getting value for money.

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by Victoria Bischoff on Feb 07, 2012 at 09:54

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Argos, Comet and Dixons vow to fix extended warranty market

Argos, Comet and Dixons have vowed to help demystify the £1 billion extended warranty market after an investigation revealed customers are not getting value for money.

Competition in the market is ‘limited’, according to the Office of Fair Trading (OFT), with only a quarter of customers shopping around for an extended warranty – far less than in comparison to other insurance products.

This is largely a result of the retailers’ ‘point of sale’ advantage which means they can sell extended warranties at the same time they sell electrical goods, the OFT said. What’s more, retailers fail to provide shoppers with enough relevant information to make an informed decision about whether the extended warranty is value for money.

Ann Pope, director of the OFT’s Goods and Consumer Group, said: ‘Millions of extended warranties are sold in the UK each year and we remain concerned that, despite recent improvements, this market does not work as well as it could for consumers.

In a bid to avoid being referred to the Competition Commission, Argos, Comet and Dixons – the largest providers of extended warranties – have pledged to provide more accessible information via in-store leaflets and set up an extended warranty comparison website to make shopping around easier for customers.

The stores also said they would conduct regular independent mystery shopping exercises and report back to the OFT on the results.

The OFT will now consult on their offerings and announce a final decision on whether it will refer the market to the Competition Commission in the spring.

According to some consumer groups, however, extended warranties are almost always a waste of money.

Research by Which? last year, for example, revealed that in one instance a five-year extended warranty on a washing machine with a relatively small chance of needing repair in the first five years would cost £170, when the initial price of the appliance was only £260.

What's more, under the Sales of Goods Act consumers have the right to claim a repair, replacement or refund from a retailer for up to six years – though if something goes wrong after the first six months it is up to the consumer to prove it was already faulty when they bought it.

Richard Lloyd, executive director of Which?, said: 'Providing more accessible information in-store will not, in itself, solve the problems with extended warranties'.

'We want to see better products at reasonable prices and for people to feel clear about what they are buying'.

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6 comments so far. Why not have your say?

Many warranties try to justify their 'added value' to include a number of external risks (eg accidents, on PC World's warranties) when in fact most household insurances can cover this anyway.

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I like Richer Sounds' extended warranty - if you don't use it, you can claim your money back. The only problem is that you only have a month to do it after it expires. Not such a problem nowadays when we all have mobile phones which can remind you in three years' time!

(I have no connection at all with Richer Sounds!)

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The guarantees that require you to prove the product was faulty at the time of purchase are the biggest rip offs, especially when you have no means by which to determine same. When a stair carpet warranted by Carpetright for 7 years against wear started to show serious signs of wear withing 15 months the shop asked me to provide a piece for sending off for examination. When I said I had no spare carpet, it was suggested that I cut a piece from the same carpet laid elsewhere-under a wardrobe,. almost needless to say, I never bought from Carpetright again.

Recently, in researching for a new TV, I was told by a salesman in Comet that stores do not automatically give a refund on defective goods and instead are sent away for /inspection/repair, which begs the question what does one do for a TV in the meantime. I also had the same issue with a newly bought laptop from Dixons which suffered from a defect known as 'blue screen of death' or similar.

That said, having bought a washing machine from John Lewis with a 2+3 year warrant and it having to be replaced within a year and the replacement needing a new pump just this month, on both occaisions there was no problem.

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They are all a rip off, unless you are extremly unlucky, the legal minimum 1 year manufacturers warranty is likley to cover the vast majority of breakdowns, accidental damage is not covered at all by most policies. They are all excellent if you like wasting money.

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I understand that you can expect Tesco will provide recompense if an electrical item bought from them has problems within 3 years

Not always the full price after a year's use - but far less hassle than I had with a refund for a 'single sided toast making' toaster got from Comet.

Re Dixon - I wanted a printer, and the 'sales person' spent 10 minutes trying too sell me an extended warrantee, and when I gave up on them and went to find a 'manager' (they are the ones with just a name on the badge) I was then told the printer was out of stock, and discontinued, and NO I couldn't have the one on display!

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Maverick

Feb 09, 2012 at 15:43

My wife bought a Brabantia ironing-board from John Lewis. After about twelve years the spot-weld broke on the main support strut. When she went to John Lewis to buy another one, she happened to mention this to the assistant. "Good Lord, bring the old one in," said the assistant - and we got a brand-new Brabantia ironing-board at no cost.

Again, no connection with John Lewis or Brabantia . . . .

But do buy insurance for your central-heating boiler. My one (a Potterton) fails every two years, regular. The repair man comes with a new circuit-board and points out to me the burn-mark where a resistor has overheated. The replacement circuit-board is now in a sealed casing so that electricians can't get to the resistor and replace it . . . . .

When I was a solicitor one of my clients dealt in Hewlett-Packard printers. He developed a "support plan", where if a business's HP printer failed, they would ring my client up, and two hours later he would be at their office with a replacement printer. He would then take the failed printer back to his works, give it a good clean, replace one of the two parts which had failed (it was always one or the other, and they each cost about 50p), and put the repaired printer back on the shelf, ready for the next customer to ring him. His customers loved the prompt service and were prepared to pay a reasonable fee for it. He doubled his profits every year for ten years!

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