Extend the warranty: I need my commission

Starting today: a new series on consumer rights and how to spot a good deal

ELECTRICAL goods, if some sales patter is to be believed, are destined to fail. Shops dealing in televisions, hi-fi, computers, washing machines and fridges are staffed by pessimists, who warn customers that the product they are buying has a high chance of breaking down, maybe within months.

Earlier this year a Curry's assistant told a Which? investigator buying a video-recorder that "machines are very unreliable and very likely to break".

Once you have been subjected to the doom-laden sales patter, you will find that the sales person has a solution: the extended warranty. Extended warranties keep your new appliance under guarantee long after the free one-year (or more) manufacturer's guarantee ends.

These policies also account for a large proportion of revenues for electrical retailers. Staff are keen to sell them because they earn commission. They are also very expensive. Dixons' Mastercare plan charges pounds 55 for a three-year warranty on a 14in Teletext TV - more than a third of the cost of the TVs!

Failures do happen. Dixons has the largest after-sales care operation in the country, with 7.3 million active warranty agreements. The company had 2.1 million call-outs last year, at a cost of pounds 60m, although the figure includes claims for accidents as well as breakdowns. Domestic and General's 3 million policyholders make, on average, 650,000 claims a year.

But it's cheaper to pay a local trader for video or TV repairs - the stores' in-house repair service is expensive.

And if you have limited cash to pay for insurance, many people would rather spend it on cover for a dishwasher or washing machine.

"People buy most often where water meets electricity, or if there is a high degree of complexity - such as a camcorder," explains Lindsey Addison at insurers Domestic and General, which sells breakdown insurance for electrical appliances and runs extended warranties for manufacturers. Much of the criticism levelled at extended warranties is a result of the way they are sold, rather than the quality of the warranties themselves. If you want to buy peace of mind, then consider the alternatives to the in-store deal.

Extending the manufacturer's warranty is usually cheaper than the deal on offer in the store. Or you can buy a stand-alone policy from an insurer such as Norwich Union Direct, Midland Bank, TSB or Domestic and General. These can cover several appliances on a single policy.

Combined cover for nine appliances, including cooker, washing machine, TV and video from Norwich Union Direct costs between pounds 7.99 a month and pounds 17.99 depending on the age of the equipment and the length of the cover. At Domestic and General, five-year cover on a TV is pounds 2.83 a month after the first year; a washing machine is pounds 4.08 a month.

These multiple policies are simpler, because there is only one company to contact for repairs, and they cover older appliances. Standalone policies save some of their costs because there is less administration, but also because they cover fewer risks.

This can actually be good news. In-store extended warranties cover accidental damage insurance and Dixons' warranties also cover theft. This level of cover is unnecessary for most households with home contents cover.

Contacts: Norwich Union Direct, 0800 888777 or http:// www.norwich- union.co.uk/ direct; Domestic and General, 08705 490000.

the knowledge: warranties

There is never an obligation to buy an extended warranty in-store. Most can be bought up to 14 days after purchase.

Extended warranties should have a cooling off period - ideally up to one year - assuming no claims. Most manufacturers warranties cover at least the first year, some three or five.

Insurance-backed warranties will be honoured even if the retailer goes out of business. If you buy a PC you may be offered a cheaper maintenance package, with no such protection.

Multi-appliance deals from one of the big insurers, not the store, are usually cheaper than several single warranties, especially if you have good household contents insurance.

Consider whether you need a warranty at all, except, perhaps, where electricity and water meet. But it might be cheaper in the long term to pay for repairs or even replace the appliance.