The Classic Christmas Con

Find out here whether you really need that pricey extended warranty.

The last time I went shopping for an electrical product (a camera), the sales assistant spent a long time telling me just how reliable it was. He then spent a long time trying to convince me to pay more for an extended warranty, in case it broke down within three years.                                  

Doesn't make sense, does it? However, it's estimated that £900 million worth of extended warranties are sold to consumers each year in the UK alone.

Those in favour say they provide valuable breakdown cover and peace of mind should anything go wrong and, of course, there are bound to be some circumstances when an extended warranty comes in very handy.

But in many cases, this sort of cover is overpriced and completely unnecessary: in other words, a classic Christmas shopping con.

Not worth it?

Consumer group Which? recently found that breakdown cover on an electrical item can cost well over half the price of the product itself.

Such goods are becoming cheaper in the UK, so you may well find that a new TV or fridge will cost little more than the price of the warranty if you do have to replace it in a couple of years time.

Unnecessary?

Generally speaking, electrical product reliability is improving. This means that if you choose wisely, the extra breakdown cover will probably not be necessary.

Remember that an extra warranty is only valid for a limited period of time - typically three to five years. After this, you'll have to pay more to keep your product 'insured'.

Already covered?

Before you pay more for an extended warranty, make sure your purchase isn't already protected in one of the following ways:

• Manufacturer's guarantee: Many products include one of these for free. If so, you can rely on this guarantee instead of extended cover if the item breaks down within the guarantee period (typically 12 months).
• Seller liability: Consumers have statutory rights which mean that if the goods aren't of satisfactory quality, stores should repair faulty goods, even if the manufacturer's guarantee has run out.
• Section 75: If you pay for something that costs more than £100 with your credit card, it will be covered under Section 75 of the Consumer Credit Act. This means, if there's anything wrong with it, the credit card company is liable to the same extent as the supplier. That's assuming the supplier has breached its contract with the buyer or misrepresented the goods or service.
• Home insurance: Before you fork out for an extended warranty, have a good read through your home contents insurance policy. If you have opted to take out accidental damage cover, then you may discover you are already covered for the cost of replacing goods accidentally damaged within your home.

If you haven't already got accidental damage cover, adding this extra feature to your home insurance policy is probably a good idea, even if you have already bought extended warranties on your valuable possessions.

This is because many extended warranties don't even provide cover for accidental damage throughout the warranty term as standard. For example, Argos' three-year 'product insurance' includes only one year's accidental damage cover. If you want accidental damage cover for the following two years and beyond, you would have to pay even more.

Finally, if you've already bought an extended warranty, you have 45 days to cancel it - so if you've changed your mind, you could still have enough time to get your money back.

Visit our Home Insurance Service to compare quotes for accidental damage cover.

More: Christmas Shopping: Know Your Rights