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Car Warranty Scams: What to Watch Out For

Jim TrummFeb 10, 2017

There are a number of legitimate and reputable used car warranty companies out there. These companies stand behind what they sell and provide protection and peace of mind for those of us who drive used cars – and those of us who bought a new car that is no longer covered by the manufacturer’s warranty.

However, there are also a lot of scammers out there, people who will try to trick consumers into giving up their credit card information, driver’s license numbers, social security numbers, and other personal data without actually providing any sort of warranty at all. Then there are those companies that provide something that looks like a real repair and maintenance contract, but is in fact written with so many loopholes that it looks more like Swiss cheese than a real warranty.

Protect Yourself Against Bogus Warranties

How can a consumer tell the good from the bad in this industry?

Step one: hang up on telemarketers. The FCC has warned about these scams. A consumer receives a call from someone who pretends to work for a car dealer or manufacturer. Caller ID says that the call is coming from one of those companies. The person at the other end of the line seems legit and knows a lot about the consumer’s vehicle and its warranty. The message is often that “your manufacturer’s warranty is about to expire,” but that by providing certain personal information the consumer can extend or renew the warranty. Of course, no such warranty or extension exists, but the consumer’s personal information is then used or sold, leaving him or her with a mess of fraudulent transactions and accounts.

Step two: beware so-called taillight warranties. No, these are not service contracts that covers the brake lights – they are warranties only good until the warranty company “drives away,” leaving the consumer to watch the scammer’s tail lights disappear along with his money. Some warranty companies go bankrupt or out of business in a matter of a few years, leaving consumers holding the bag for repairs they thought were covered. A quick check with the Better Business Bureau can often determine how long a company has been in business and give consumers some idea of what its reputation is.

Step three: carefully read the contract and the warranty. This isn’t fun. No one likes wading through legalese. But it’s vital. There is a big difference between manufacturers’ warranties and third-party warranties in terms of what is covered and what kinds of repairs and replacement parts will be paid for. If possible, try to go with a company that has an exclusionary warranty. They specifically list the kinds of repairs that are NOT included under the warranty, the implication being that all other repairs are included. These contracts are generally easier to understand than inclusionary warranties, which can take advantage of a consumer’s lack of understanding of automobile technology and systems. 

Step four: make sure the vehicle in question is not already covered by a manufacturer’s warranty. Just because a letter, email, or phone call says a particular car’s warranty has expired or is about to expire doesn’t mean it’s true. A consumer with a three year/36,000 mile warranty from the manufacturer doesn’t need a third-party warranty after only two years and 20,000 miles. Further, some vehicles which have been recalled already have de facto warranties on certain vehicle systems. Understanding what is already covered on a particular vehicle will help consumers avoid the purchase of duplicate coverage.

Find the Reputable Car Warranty Companies

As with most consumer purchases, forewarned is forearmed when it comes to avoiding used car warranty scams. Another way consumers can arm themselves is by reviewing the various plans offered by our top ten car warranty companies. We’ve already kicked the tires and driven them around the block.