Should you purchase an extended warranty?


Purchasing a vehicle, boat or other product can be very time consuming. The research that goes in to that purchase, the shopping around for the best product and price and then the decision on how to fund it. It is (or should be) an exhilarating experience. After all, there is nothing better than treating yourself to a new “toy”, a reward for the hard work of life. It can give you a great feeling of satisfaction, and allow you to get more out of life.

When many of us make the decisions to purchase expensive products – like cars, boats, 4WD’s; the thought of it breaking down rarely crosses our minds. Yes, if you purchase from a dealer you are provided with a 3 month Statutory Warranty or a Manufacturers Warranty for a new car. But what happens when these coverage periods expire?

Extended Warranty’s or Mechanical Breakdown Warrantys are like any insurance product, they provide you with the peace of mind in the event your vehicle breaks down and/or has mechanical issues. But are they worth the paper they are written on? Having spent many years in the finance industry, i can tell you this. Not all Warranty products are the same. Not all Warranty Providers are the same. And not all Warranty Retailers are the same.

You have to do your homework. Here are a few tips for you to consider when purchasing a Warranty:

  • Price versus Value: Price is what you pay, Value is what you get. So make sure you understand the coverage of the policy and the price you are paying. if you are purchasing the Warranty from the Dealer, then these prices are likely negotiable. Don’t be afraid to ask for a discount, so the price you pay reflects the value you are getting. Compare the Dealers offer to other products in the market. And take your time, don’t be rushed in to making a decision.

  • Extended Warranty’s are an optional feature, they are not compulsory.

  • A product quote should be provided upfront with the Product Disclosure Statement. And in most cases, the Dealer and Broker should only factual advice.

  • Read what is covered in the Product Disclosure Statement (the PDS).

    • The PDS outlines the Policy you are purchasing. Everything you need to know is in this document. Read it carefully before you purchase the product. This must be provided upfront by the Insurer or Retailer. (prior to purchase).

    • Check out the components that are covered, the limits on the payouts and the maximum benefit over the term of the Policy.

    • Understand the exclusions in the Policy. What isn’t covered. For example, if you have used the vehicle off road – is this covered in the Policy in the event of mechanical failure?

    • What are the servicing requirements? How often do you have to service the vehicle – is this in line with the Manafacturers requirements or are there additional service requirements?

  • Most Warranty products have a cooling off period of 28 days. So if you purchase the product, a full refund may be available within this timeframe. On the spot sales can bread misleading conduct, unfair sales tactics. pressure selling and false representation. This cooling off period allows you to reconsider your purchase, if in fact you purchased the product under sales duress.

  • Is the Warranty a “Discretionary” Warranty? This type of Warranty can be worthless in the event of a claim. Discretionary, is exactly that. It is the Insurers sole decision to make payment for the claim (at their discretion). You would want to further investigate the reputation of the Insurer and ensure they are regulated by the General Insurance Code of Conduct.

  • Is the Insurer a signatory under the General Insurance Code of Conduct. The Insurance Council of Australia (ICA) has developed a voluntary

    General Insurance Code of Practice. This Code aims to raise the standards of practice and service within the general insurance industry. To obtain a copy of the Code visit

  • if you are purchasing a new car with a Manafacturers Warranty. Ask the Dealer if the extended warranty can be purchased at a later date if you are unable to afford it at the time of purchase.

  • Consumer Guarantees, under the Australian Consumer Law (ACL) may require the original vendor to cover the cost of any repairs if they are deemed liable under the ACL. In which case your Insurer may not be required to make the payment.

Warranty Sales were a focus of the Hayne Royal Commission in 2019 given the unscrupulous sale of Warranty’s by some Dealers and Brokers. One of the recommendations which will be implemented on the 4th october 2021 is the Deferred Sales model. This ensures that Dealers and Brokers alike, are unable to offer a Warranty product within 4 days of the purchase of your vehicle. Its a no-go zone. This provides you with the time to compare products in the market, This is a great example of how the Regulators have taken control, and ensured these high-pressure sales tactics are eliminated from the industry.

You have to remember that vehicles (and that includes boats, caravans and jet skis) are machines. They can breakdown. There are no guarantees they will not. And when they do, they can be expensive to repair. Warranty’s can be great for piece of mind. The question is – what price do you put on peace of mind?

If you have any questions about extended warranty’s feel free to contact the yesapproved team.

The Insurers used by the Yesapproved team are all regulated by the General Insurance Code of Conduct and the premiums are set by the Insurer,. The premiums are determined by a price = value model. We do receive commissions from the sale of insurance products in line with Industry regulation and requirements.

Advice contained in this blog is factual advice only and does not form an opinion on whether you should, or should not purchase a warranty.

The information is intended to be of a general nature only. We do not accept any legal responsibility for any loss incurred as a result of reliance upon it – please make your own enquiries.

Any advice contained in this document has been prepared without taking into account your particular objectives, financial situation or needs. For that reason, before acting on the advice, you should consider the appropriateness of the advice having regard to your own objectives, financial situation and needs.

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