Recent government policy changes have lowered the number of extended auto warranty scams, but buyers should still beware of deceptive advertising, high pressure tactics, and unscrupulous policies.
A vehicle protection plan or extended auto warranty can offer a lot of benefits, especially if you plan to keep to your vehicle after the original factory warranty has expired. But, finding a reputable source for extended coverage is not always easy. There are so many companies online that make wonderful promises. Distinguishing between fact and fiction can be exasperating.
You may be getting phone calls or mail notifications about renewing your “warranty”. The brochures can look very legitimate and professional, and the agents may sound intelligent and knowledgeable. But, do you even have a factory warranty, and is it really about to expire? This is a very common tactic and should raise a red flag - unless you know that your factory warranty is really about to expire.
There have been many people who have signed up for a policy only to find that they are unable to cancel or get a refund once they realize that the agreement is not what they were expecting.
A vehicle protection plan is a great investment, but there are a few things you should look for to avoid falling victim to a scam.
Know your warranty. If your vehicle is still under the factory warranty or you have extended coverage of some kind, you should know the terms of the contract as well as the expiration date. This way, you will not be misled by claims that it is time to renew. Also, if your current company wants to sell you a new service contract, they will already know pertinent information such as the policy/contract number, so you should be able to use this to verify legitimacy.
Be aware of high-pressure sales tactics. You should be cautious if the company offers a "limited time deal" or creates a sense of urgency by insisting that you commit right away. If they are reluctant to let you see the policy before you agree to a down payment, then deal with a different company. Most reputable companies will allow you the time to review the terms and conditions of the contract before expecting your commitment. Do not agree to make a purchase or give a down payment until you have seen in writing exactly what you are paying for. If you feel pressured or uncomfortable, deal with another company.
Unfounded claims. New policies prohibit companies from falsely claiming affiliation with dealerships or auto manufacturers; however, they will still try this tactic. If in doubt, call the dealership or automaker to verify this information. If you cannot verify the affiliation then deal with a different company.
Extreme discounts. If a company offers you a $500 or $1000 discount they will most likely insist that you 'buy today'. Be aware that this is just a tactic to get you to commit. This is a dishonest practice as their prices are inflated by $500 to $1000 to begin with so my advice is to deal with another company.
Extended warranty. Be advised that the only entity that can offer you an 'extended warranty' is the factory or a factory representative such as a dealership. All others (third parties) are required to sell a "vehicle service contract", "vehicle protection plan" or in some states such as California, "mechanical breakdown insurance". The plans offered by third-parties can offer more coverage for less money but you must make sure that you're dealing with a reputable company. If the company you're dealing with is offering you an "extended warranty" and they are not a factory representative then deal with another company.
Complaints and feedback. You should always research the company before you purchase any auto service contract. Check with the Better Business Bureau to see if any complaints have been made, and read reviews or message boards to find out what other customers have experienced. Organizations like the BBB have several complaints and warnings listed, and client feedback is a great source of information. You want to look for a long history of positive and reliable service.
A vehicle protection plan can give you peace of mind when unexpected failures occur, but it is important that you make a wise and informed choice. Knowing how to recognize extended auto warranty scams can help you find a company that will fulfill its commitments and be there when you need them.