Cars are the second largest expense in most people’s lives following housing. So it’s only naturally that many of us would want some peace of mind when making a vehicle purchase, be it used or new. That peace of mind often comes in the form of an extended auto warranty.
But beware, there are hidden dangers with these things…
A look at the extended warranty scam
Earlier this month, the Federal Trade Commission began mailing more than $4 million in refunds to nearly 6,000 consumers who were duped by a company selling extended warranties via robocall back in 2011.
That company, which did ‘business’ under the name My Car Solutions, used automated calls to push service contracts ranging in cost from $1,300 to nearly $2,900.
No one who fell for the ploy received a warranty extension and the FTC says it was all but impossible to request a refund from My Car Solutions.
There’s an important consumer financial lesson here: Don’t ever buy an extended warranty on your vehicle from a third-party company. Odds are you’ll be overcharged and the company will disappear when you need help.
My Car Solutions is just the latest in a string of telemarketers hawking extended car warranties who have gotten busted.
A few years back, it was the now defunct USfidelis. They were perhaps the most heavily marketed extended auto warranty in the country at the time. Remember their blitzkrieg of ads on bad late-night TV featuring NASCAR legend Rusty Wallace?
Unfortunately, the promises were all a sham. Consumer Reports investigated this once popular outfit and found USfidelis failed to respond to more than 1,000 complaints from the Better Business Bureau.
Among the complaints were gripes about the difficulty of canceling the warranty; obtaining a refund; the nature of the company’s misleading ads; their misrepresentation of coverage; and their failure to remove customer names from mailing lists.
In addition, Consumer Reports revealed that USfidelis told them customers were not allowed to see their contract until after they purchased it. You just know that means somebody is up to no good when that’s the case!
What’s the alternative to an extended car warranty?
Clark’s longstanding advice has been this: If you can afford the potential cost of a car repair, you should never buy an extended warranty. But if you’re unable to budget and save for repairs, then you may want to consider buying the manufacturer’s own warranty. Never buy from a third party! If trouble happens, the manufacturer is probably going to be there to stand behind its warranty. A third-party company will not.
But if you stick to Consumer Reports’ annual recommended list of vehicles, you shouldn’t have to buy an extended warranty at all — even if you have budgeting difficulties. The odds are such that their recommended vehicles won’t have severe problems over time.
Read more: 11 best used cars for your money right now