FAQ Friday: How Do I Know if an Extended Warranty Offer is a Scam?
Our Forums discussion on extended warranties started in 2003 with the question, "Does anyone know of a "reputable" company that sells extended warranties, besides GM?"
Six years and almost 3,000 entries later, the discussion still rages. The most "reputable" extended warranty companies are, by and large, the automakers themselves. But there are many third-party extended warranty companies that are damaging the industry by roping consumers into bad deals or downright fraud.
Through clever language and misleading mailings, they fool many consumers into thinking they're buying an manufacturer-backed warranty. Many of their victims lose most or all of their money.
Our new article, Third-Party Extended Warranty Scams, comes hot on the heels of the new FTC ruling prohibiting robocalls, itself a result of the extended warranty scams that made national headlines this spring. It illustrates the nasty tricks these companies pull, and offers tips on what to look for in an extended warranty -- and when you should run in the other direction. Consider yourself warned.
- Posted by
- Joanne Helperin October 2, 2009, 11:00 AM
- Permalink
- Categories:
- Car Advice Articles, Car Warranty
First, if people stepped back and used their higher brain functions, they wouldn't fall into this trap. Caution is the rule. Second, it appears that even with thousands of complaints and a record of breaking the law, legal enforcement is ponderously slow and lacking any real bite. Third, if even a handful of people read your article and are persuaded to be more cautious, then it was a benefit to society.
Overall, I don't think extended warranties have ever been a good deal.
Instead of spending the money on an extended warranty, how about you take that money and put it in savings somewhere. Then, if your car needs a major repair you got a little fund to cover it. If it doesn't end up needing one, you've got the start of a nice emergency fund.
The advantage here is it's still your money, you can do with it as you wish.
Now, sure, you're car could possibly have some real problem that requires a new engine or transmission. But really, the likelihood of that happening isn't very good unless you haven't been maintaining the car that well, in which case an extended warranty company would never cover it anyway.