Warranties sold by electrical retailers are a rip off according to nearly nine out of ten respondents to a PC Advisor poll.
Just 1.4 percent considers warranties to be good value for money, while 11 percent reckon that, though pricey, they are good for peace of mind. But 87.6 percent condemns warranties as a rip off.
The results reinforce a recent mystery shopping investigation by the Office of Fair Trading (OFT), which is now convinced that the British Retail Consortium’s self-regulation may not be working.
The OFT sent shopping spies into 200 electrical retailers across the country which revealed high levels of ignorance on behalf of sales staff when it comes to the 1979 Sale of Goods Act.
The OFT’s undercover shoppers found that when consumers return faulty goods, sales staff tend to pass on responsibility to the manufacturer. Under the Sale of Goods Act it is the retailer’s responsibility to sell products that are ‘fit for their purpose.’
And that’s before taking into account the manufacturer’s standard one year warranty, which customarily comes in the form of free repair or replacement without dispute.
Customers are often unaware of their consumer rights when taking out warranties. And observers suggest that commission-hungry sales staff exploit their ignorance to flog warranties with excessive zeal, often adding 20 percent to the original selling price. This extra revenue now generates £1 billion annually, up from £650m in 1994. One of the most successful sales tactics is to raise the spectre of accidental damage, not covered by the manufacturer’s warranty.
Dixons Store Group, which includes PC World, Dixons, Currys and The Link, currently has over 11 million Coverplan warranties in issue and claims over half a million people a year renew their agreements.
“Around 70 percent of customers who renew their agreements, do so more than once, so we must be doing something right,” said a spokesman for the company.
But according to Mike Naylor, senior researcher for Which Magazine, the danger of accidental damage does not necessarily mean a warranty is value for money when you can take out much cheaper standalone policies.
Naylor points out that that the cost of the repairs is often far less than the cost of the warranty.
“You’d be better off saving the money and then dip into it if you’re unlucky enough to damage the goods.”
PC Advisor readers speak out:
James Rae
“Paid-for warranties are a huge source of profit for the companies and a big commission item for sales staff.”
Neil Bailey
“Warranties? You spend 20 minutes listening to some spotty 18 year old about how good this PC/HI-FI is, then they tell you to buy a warranty because it might break down.”
Stephen Whitfield-Almond
“Most electrical equipment these days will NOT fail for at least four or five years. Even if it does fail, it is likely to be a cheap component that breaks.
It is also worth noting that many household insurance policies now provide ‘failure cover’ so a browse through the policies’ terms and conditions is worth doing.”
Paul Bournat
“Technology moves so quickly and prices drop so fast, that after a few years it can often make sense to upgrade rather than repair.”
Andy Hickey
“The only people that gain from warranties sold by electrical retailers are the retailers themselves who regard them as a nice little earner…..thank you very much.
And of course the sales staff, who are told to push these warranties by their companies in return for a nice little commission.”