Today’s decision by The Co-op means they won’t profit from extended warranties, but other retailers offer them for free
Even though there is a debate to be had on whether extended warranties are worth the money, one in five UK consumers seek the peace of mind offered by the additional insurance option when purchasing electrical goods.
Depending on where you purchase your goods from the cost and the added benefits of these types of policies can vary considerably. An investigation by the Office of Fair Trading in 2012 highlighted a number of competition concerns that meant customers were not getting the best value for money, as well as specific issues around the huge expense of pay as you go warranties.
The Co-operative Electrical claims to champion a new way of providing extended warranties and has today, 14 October promised to make no profit on the insurance option on a range of products, from cookers to fridge freezers and TV’s to washing machines.
It is estimated that the warranty market for electrical goods is worth £1 billion a year in the UK, and in some cases consumers can pay almost as much for the warranty as the product it was purchased to cover.
According to the Office of Fair Trading’s warranties comparison website, a five-year extended warranty on a £400 washing machine can cost almost as much as the product itself if paid on a monthly basis (£6.50 a month – £390 over five years), versus a one-off payment of just under £80 with the new offering from The Co-operative Electrical.
The same website shows that a monthly payment over five years on a £700 television would cost more than half the price of the product (£390).
James Holland, Managing Director of Co-operative Electrical said: “A significant number of consumers seek the reassurance offered by an extended warranty, however we believe that this market should be easier to understand and represent real value, particularly when you compare the price of the warranty with the actual price of the electrical product. In most cases it is just far too expensive.
“In line with our Group purpose, we are championing a better way of doing business by providing at cost, extended warranties which offer real added benefits for those consumers that want peace of mind.
Mr Holland continued: “If customers do choose to take out the additional cover we want them to benefit from one of the best policies on the market. That is why our warranty not only insures against breakdown or accidental damage, but also protects against food loss in the case of freezer breakdown, and if the product has to be repaired for a third time it will automatically be replaced with a new one.”
1. Check whether your credit card offers you a free warranty.
2. Add this to the manufacturer’s free one year warranty and that could mean two years’ cover for nothing.
3. It is also worth checking your home insurance which may cover accidental damage however if you do claim on your house insurance make sure you don’t lose your no claims bonus.
4. Check what guarantee is provided by the manufacturer.
5. Some manufacturers provide more than one year.
Finally do you really need a warranty? If the cost of the cover is near to the cost of the product you might be better off taking the risk and if the product breaks – replace it. Extended warranties can be value for money but this depends on the price compared to a replacement and the quality of the policy.