Auto Warranty Scams

Ever get one of those phone calls where a recorded message tells you your vehicle warranty is about to expire and to hold for one of their representatives? Perhaps you’ve gotten a letter in the mail that appears to be from the manufacturer or the BMV warning you that you need to extend your warranty coverage and this is your final notice. I even had my previous insurance company try to tack on a vehicle warranty to my insurance policy without my knowledge (when my car was still under the manufacturer’s bumper-to-bumper warranty). It’s a pretty safe bet to assume it’s a warranty scam if you receive any of these phone calls or mailers, even if it looks like it came from the manufacturer or state motor vehicle department.

Having some kind of warranty coverage is important to many vehicle owners. It’s nice to have the peace of mind knowing that if there is a problem with your vehicle, you won’t have to spend thousands of dollars for an unexpected repair. In fact, most dealership employees buy additional coverage when they purchase their vehicles.

The first thing to be aware of is the official lingo for these products. Legally, only the original manufacturer can offer a warranty. Manufacturers and legitimate third party companies that sell extended coverage beyond the manufacturer’s warranty call their product a service contract or service plan. Many scammers call their product an extended warranty or use confusing language that implies it is an extended warranty or a replacement for the manufacturer’s warranty because more people are familiar with the concept of an extended warranty rather than a service contract.

There are four issues to be aware of when it comes to service contracts to make sure you are getting what you are paying for and expecting.

    1) Scammers
    2) Fly-by-night operators
    3) Companies that give you the run around
    4) The fine print

 

      Scammers

Most of the unsolicited robocalls and mailers for extended warranties come from scammers. Scammers obtain your contact information and vehicle information either through public sources or private data aggregators. Many get the information directly from your state motor vehicle department for a fee. Just because someone has your contact information and your vehicle information doesn’t mean you should trust them. Anyone can get that information.

Many scammers will also misrepresent their affiliation as well. They may claim to be from the Bureau of Motor Vehicles, the manufacturer, or the dealership you bought your vehicle at. One of the issues that has made it difficult to track down who is responsible for these scams is that they frequently hide their real phone number from Caller ID and make it look like the call came from a different number (usually a number from the same area code you are in).

If there are any legitimate and reputable third party businesses out there selling service contracts for vehicles through unsolicited phone calls and mailers, the degree to which these methods of contact are dominated by scammers makes it safer to avoid any of these offers completely.

I strongly recommend against giving your personal information or payment information to any of these companies. Many scammers will say that they just need your credit card information to reserve your special offer or that you will have 30 days to decide if you want the product they are selling, but we’re talking about scammers. If you give them that information they will take your money and they will make it as hard as possible for you to get it back. It also shouldn’t be a surprise that if you buy an extended warranty or service contract from a scammer, you aren’t going to be covered if you vehicle needs repairs.

 

      Fly-by-Night Operators

It should not be a surprise that a large industry that attracts lots of scammers also attracts less than reputable businesses. A common problem with third party companies selling service contracts is that they don’t stay in business for long. They take your money upfront, and then they are no longer in business when you need to use your service contract for repairs.

Prior to collapsing and declaring bankruptcy in 2010, U.S. Fidelis was the largest company selling extended warranties in the nation. The two brothers that founded the company both received prison sentences. An interesting side note, the charges included calling their product an extended warranty instead of a service contract.

 

      Companies that give you the runaround

Disreputable third party companies selling service contracts make it as hard as possible to get any money out of them. If you want to cancel and get a refund for any unused coverage, they may make you wait on hold for hours on end. They may also make it as hard as possible to collect on a claim.

Getting the runaround from one of these companies is not necessarily a red flag. Just as there are scammers targeting consumers, there are also scammers targeting service contract providers by trying to collect on repairs that weren’t performed or that were unnecessary. This explains why it is much easier for a reputable dealership to deal with these companies. There is a business relationship and a certain degree of trust involved.

 

      The Fine Print

Lastly, it’s important to know what your warranty will actually cover and if you will be responsible for any payments out of pocket. There aren’t any warranties or service plans out there that cover everything, and if you buy the lowest level of coverage, there are going to be a lot of things that aren’t covered.

Many service contracts out there don’t cover normal wear. If you have this type of service contract, it can be very difficult to collect on repair costs for an older vehicle with high miles. While the normal wear clause typically applies to things like tires, brakes, and oil changes not being covered for a vehicle with low miles. With high miles, there are a lot more things that can go wrong as a result of “normal wear”.

Some warranties and service contracts may have a deductible that you will need to pay out of pocket for every service visit. Some also have a maximum amount for coverage. If the cost of your repairs are over that maximum, you would have to pay the additional costs.

 

      How to protect yourself and your vehicle

The best way to buy an extended warranty or service contract is through a reputable dealership that will stand behind the products they sell. A reputable dealership wants their customers to be taken care of. A reputable dealership has the industry experience and expertise to avoid the scammers and fly-by-night operators. Lastly, a reputable dealership has a lot of leverage when dealing with third party service contract providers. A warranty company that rejects a legitimate claim risks losing a lot of future business with the dealership.

Even the good warranty companies can be hard for consumers to deal with directly. This is one of the advantages of dealing with a good dealership. At our dealership we have a good working relationship both with Ford (for warranty work and extended service plans) as well as a reputable third party service contract provider that has been in business for over 50 years. We have someone at the dealership who handles the warranty claims for you and if you want to cancel additional coverage with a refund of unused coverage, we have someone that will take care of that for you as well.

 

For questions and comments, feel free to call me at 812-331-2200 and ask for Robert Kobey.