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Disclaimer: Educational purposes only. Not legal advice. Consult a qualified NZ legal practitioner for your specific circumstances.

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consumer

Are extended warranties worth it in New Zealand?

Key Takeaway

In New Zealand, extended warranties offer additional protection beyond existing consumer rights under the Consumer Guarantees Act 1993 (CGA). The CGA provides statutory guarantees that goods must be of acceptable quality and fit for purpose for a reasonable time. The Fair Trading Act 1986 (FTA) prevents sellers from making misleading claims about extended warranties or statutory rights.

Understanding Extended Warranties and Consumer Protection in New Zealand

An extended warranty is an optional service contract purchased by a consumer to cover the repair or replacement of a product beyond the manufacturer's original warranty period or the duration of statutory guarantees. In New Zealand, consumers have significant protections under consumer law, primarily the Consumer Guarantees Act 1993 (CGA) and the Fair Trading Act 1986 (FTA), which are important to understand when considering an extended warranty.

The Consumer Guarantees Act 1993 (CGA)

The Consumer Guarantees Act 1993 (CGA) provides a set of automatic statutory guarantees for goods and services purchased for personal, domestic, or household use. These guarantees apply regardless of any manufacturer's warranty or extended warranty [Source: Consumer Guarantees Act 1993, s 2, s 43].

Key Guarantees for Goods:

  • Acceptable Quality: Goods must be fit for all the purposes for which goods of the type are commonly supplied, acceptable in appearance and finish, free from minor defects, safe, and durable. This standard is judged objectively, taking into account the nature of the goods, their price, and any statements made about them [Source: Consumer Guarantees Act 1993, s 6]. The goods must remain of acceptable quality for a reasonable period, which is not defined by a specific timeframe but depends on factors like the type of product, its cost, and expected lifespan [Source: Consumer Guarantees Act 1993, s 6].
  • Fitness for a Particular Purpose: Goods must be fit for any particular purpose that the consumer made known to the supplier before purchase [Source: Consumer Guarantees Act 1993, s 7].
  • Match Description: Goods must match their description or any sample or demonstration model [Source: Consumer Guarantees Act 1993, s 8].
  • Reasonable Price: If no price is agreed upon, the consumer is not liable to pay more than a reasonable price for the goods [Source: Consumer Guarantees Act 1993, s 10].

Remedies for Breaches of Guarantees for Goods:

When goods fail to comply with a guarantee, the remedies available depend on whether the failure is minor or major:

  • Minor Failure: If the failure can be remedied easily, the supplier can choose to repair, replace, or refund the goods. If the supplier does not remedy the failure within a reasonable time, the consumer can have it remedied elsewhere and recover the reasonable costs from the supplier, or reject the goods [Source: Consumer Guarantees Act 1993, s 18, s 19, s 20].
  • Major Failure: A major failure occurs if the goods depart significantly from an acceptable quality standard, are unsafe, or are substantially unfit for purpose. In such cases, the consumer can reject the goods (and choose a refund or replacement) or claim compensation for any reduction in value [Source: Consumer Guarantees Act 1993, s 21, s 23].

Guarantees for Services:

Similar guarantees apply to services, including that they must be carried out with reasonable care and skill, be fit for a particular purpose, and be completed within a reasonable time and for a reasonable price [Source: Consumer Guarantees Act 1993, s 28, s 29, s 30, s 32].

It is important to note that suppliers cannot 'contract out' of the CGA when goods or services are supplied to consumers, meaning they cannot make a consumer agree to give up their rights under the Act [Source: Consumer Guarantees Act 1993, s 43].

The Fair Trading Act 1986 (FTA)

The Fair Trading Act 1986 (FTA) prohibits misleading and deceptive conduct by businesses, including in relation to extended warranties. Its purpose is to ensure fair competition and protect consumers from unfair trading practices [Source: Fair Trading Act 1986, s 1A].

Key Provisions of the FTA:

  • Misleading and Deceptive Conduct: No person in trade shall engage in conduct that is misleading or deceptive or is likely to mislead or deceive [Source: Fair Trading Act 1986, s 9].
  • False or Misleading Representations: The Act specifically prohibits making false or misleading representations about goods or services. This includes claims about the nature, characteristics, suitability, quantity, or benefits of goods or services [Source: Fair Trading Act 1986, s 13].
  • Misleading Representations about Warranties: Specifically relevant to extended warranties, it is unlawful to make a false or misleading representation concerning the existence, exclusion, or effect of any condition, warranty, guarantee, right, or remedy [Source: Fair Trading Act 1986, s 13(i)].

This means that a seller promoting an extended warranty must not mislead consumers into believing that the warranty offers rights or protections that are already provided by the CGA or other consumer laws. For example, a seller cannot imply that a product only has a 1-year guarantee when the CGA's 'acceptable quality' guarantee may last significantly longer for that product.

Extended Warranties vs. Statutory Guarantees

Extended warranties can offer benefits such as covering accidental damage, providing faster repair or replacement services, or offering a longer period of protection than might typically be expected under the CGA for certain components or products. However, the CGA already provides comprehensive protection for consumers, requiring goods to be of acceptable quality and fit for purpose for a reasonable lifespan, which can extend for several years depending on the product.

When considering an extended warranty, it is important to understand the extent of coverage already provided by the CGA and compare it with the additional benefits (if any) offered by the extended warranty. The FTA ensures that sellers must accurately represent the benefits of an extended warranty and not mislead consumers about their existing rights under the CGA [Source: Fair Trading Act 1986, s 13(i)].

When to Seek Independent Legal Advice

Individuals facing issues with a product or service, or who believe they have been misled about an extended warranty, may benefit from seeking independent legal advice. Information on consumer rights can be obtained from official government sources like the Ministry of Business, Innovation and Employment (MBIE) or directly from Community Law Centres for free advice [https://communitylaw.org.nz/].

Key Resources