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June 2, 2022  |  Education

Does a warranty only protect the buyer?

What is the purpose of a warranty?

The buyer does not always think too much about a warranty. Often, in their mind, a warranty is merely something that comes with the purchase of an item. It is to keep the buyer protected in case anything goes wrong by making sure there is a path they can follow to seek satisfaction. In truth, this is only half the story. A warranty covers so much more.

What is a warranty?

A warranty is an agreement between the buyer and the manufacturer. It outlines the responsibilities and expectations of each party should something unexpected happen.

Types of warranties and how they work

A warranty can take many forms. It can be a written document, an advertising claim, an oral promise, or even implied at the time of the sale (and never stated). At its most basic level, a warranty serves two primary functions: it outlines expectations and details what happens if those expectations are not met.

It is important to realize that this agreement is not one-sided. It is intended to protect both the buyer and the manufacturer. If a buyer purchases an ultra HD TV, brings it home, turns it on, and finds it does not work, the warranty protects the buyer. If, on the other hand, a consumer purchases a gas grill and modifies the appliance in a way that renders it inoperable (or dangerous), the manufacturer will not be obligated to rectify the problem. 

Is there a law governing warranties?

In 1975, Congress passed the Magnuson-Moss Warranty Act. This is the federal law that governs warranties.

What is the Magnuson-Moss Warranty Act?

The purpose of the Magnuson-Moss Warranty Act is two-fold: It protects the consumer and promotes competition among manufacturers. 

  • Protects the consumer: The Magnuson-Moss Warranty Act was written to ensure that consumers could make informed buying decisions by getting detailed information on what to expect from a product before purchasing. This information gives the buyer the ability to compare products based on expectations and the coverage offered.
  • Promotes competition: For the manufacturer (or seller), the Magnuson-Moss Warranty Act lets a company leverage a warranty as a selling point to foster competition. 

What isn’t covered under the Magnuson-Moss Warranty Act?

As beneficial as the Magnuson-Moss Warranty Act is, it has limitations.

  • The Magnuson-Moss Warranty Act only covers written warranties. An implied warranty or an oral promise are not covered by the 1975 law. Only an express warranty that is put in writing is covered by the Magnuson-Moss Warranty Act.
  • The Magnuson-Moss Warranty Act only covers goods. This act does not typically cover services. However, if a manufacturer voluntarily puts repair and workmanship coverage in writing, then it would be covered.
  • The Magnuson-Moss Warranty Act only covers consumer goods. This act is not intended to cover items sold for commercial purposes or resale.

How does a manufacturer benefit from a warranty?

There are five primary ways a manufacturer can benefit from a warranty:

Protects from customer misuse

If a consumer uses a product in a way it was not intended, and the product fails, the written warranty is one of the most important tools a manufacturer has to protect itself. The warranty may also state that repairs can only be performed by authorized technicians for the same purpose.

Sets a time limit for coverage

It is possible that a basic tool, such as a hammer, may come with a lifetime warranty. However, appliances, such as washing machines, have parts that will fail due to normal wear and tear. Additionally, products simply do not last forever. Warranties can protect the manufacturer by limiting coverage time.

Bolsters consumer confidence

A product that has a great warranty gives a consumer confidence that the item they are buying is a quality item. This helps foster brand loyalty and repeat business.

Provides an additional marketing strategy

If a product has an exceptional warranty, it gives them an additional way to market that product. Companies such as Craftsman, JanSport, and Vermont Teddy Bear have developed loyal customer relationships by advertising their lifetime warranties.

Increases sales

Perhaps the biggest benefit of a warranty is it increases sales: when consumers have confidence in a product, they are more likely to purchase it.

FAQ

Are warranties transferable?

A. The Magnuson-Moss Warranty Act requires the warranty of every product, which costs more than $10 to be labeled “full” or “limited.” If the warranty is designated as full, it is transferable. A limited warranty may still be transferable, but the consumer will not know for sure until they read the warranty documentation.

Do you have to activate a warranty?

A. If a company is offering a limited warranty, the Federal Trade Commission allows there to be certain stipulations for activating that warranty, such as filling out the registration information. However, the first and most important step is that the manufacturer must clearly state that the warranty is a “limited” warranty to do this. 

Can a manufacturer deny a warranty?

A. If the terms and conditions of a consumer's responsibility are listed clearly and it can be proven that the consumer violated any of those points, a warranty claim can be denied. To protect itself from unwarranted claims, a company may stipulate that a product is only eligible for certain coverage, such as return or replacement, if the product is returned in the same condition it was sold. Be sure to read through the entire warranty before making a purchasing decision.

Can a warranty save the consumer money?

A. Besides protecting the manufacturer, a warranty can decrease the overall cost of ownership of a product. This is possible because it limits or eradicates the expense of repairs and services that might be covered by the warranty.

What happens if a company fails to honor its warranty?

A. A warranty is a contract between the consumer and the manufacturer or seller. All the terms and conditions that govern that warranty are put in writing. If a company fails to honor its warranty, you can file a claim for breach of contract. While the reward for winning a case varies from state to state, it gives the buyer legal recourse to settle any disputes.

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Allen Foster writes for BestReviews. BestReviews has helped millions of consumers simplify their purchasing decisions, saving them time and money.

BestReviews spends thousands of hours researching, analyzing and testing products to recommend the best picks for most consumers.