Issue Date:  -  Thursday, 26 April 2001

'Buyer beware' of extended warranty policies

The Ministry of Fair Trading is reminding consumers to read the fine print before signing up for extended warranty insurance when buying a used car.

Commissioner for Fair Trading Patrick Walker said that each year the Ministry received many consumer inquiries about extended warranties.

Mr Walker said an extended warranty was similar to an insurance policy taken out to cover a vehicle against mechanical breakdown.

He said consumers often purchased an extended warranty when buying a used car. An extended warranty was not a substitute for any statutory warranty that might apply.

On average, Fair Trading receives about 10 complaints a week from consumers who have expected their extended warranty policies to cover any mechanical breakdowns.

"Too often consumers will assume that they understand what is covered by their extended warranty insurance," Mr Walker said.

"Once a claim arises it then becomes obvious that not all matters are covered by the policies.

"Prior to purchasing any extended warranty or policy, it is critical for the client to have a proper understanding of its benefits, limitations and rules to prevent disappointment and possible financial expense.

"Many policies will not cover mechanical failure caused by wear-and-tear and this is the very reason that some consumers purchase the policy.

"The old adage 'buyer beware' remains true even today."

Consumers can call the Ministry of Fair Trading Call Centre on 1300 304 054 for more information on this issue.

Media contact: Kylie Lee 9282 0695