Warranty buyers 'losing out'

The figure is based on a calculation of the price differences between warranties sold in-store to customers and those available from other sources such as manufacturers.

The warning comes just prior one of the busiest times of year for electrical retailers.

A quarter of all electrical goods are bought during November and December.

Guarantee

Customers are usually offered the option to extend the statutory 12 month manufacturers warranty in-store.

One in five electrical goods are sold with an extended warranty.

According to a survey of 2,346 shoppers only 1 in 8 customers are aware that there is an alternative to buying an extended warranty in store.

In addition, the survey found that warranties purchased over the counter are 38% more expensive than those offered by manufacturers and banks.

Big business

The extended warranty industry is worth an estimated £500m every year.

Price difference
Zanussi 1600 Washer Dryer £549.95
Retailer four year warranty extension £199
Insurer four year warranty extension £108
Source: Warranty Direct

Sales in the run up to Christmas account for between £120-150m.

As a result, according to insurer Warranty Direct, the survey sponsors, consumers paying over the odds in-store means that they are losing out to the tune of £50m.

The one-off cost of a four year extended warranty can equate to more than half the cost of the item purchased.

"People need to realise there is absolutely no need to rush into buying a policy there and then," Duncan McClure-Fisher, managing director of Warranty Direct said.

In response, Dixons Group, the UK's largest electrical retailer defended the its extended warranties.

"Customers need to look closely at what is on offer," Dixons spokesman Hamish Thompson told BBC News Online.

"Retailer extended warranties can include accidental damage and theft, however, insurers and manufacturers often don't cover such mishaps.

"We believe our extended warranties offer peace of mind."

Investigation

In July, the Office of Fair Trading (OFT) reported the findings of a 10-month investigation into extended warranties.

It concluded that self-regulation in the industry had failed and condemned the tactics used by electrical retailers to sell warranties.

The OFT has since referred sale of extended warranties to the Competition Commission.

The commission is due to report next summer.