Don’t Get Scammed By Third-Party Extended Warranties

If you get approached to purchase a warranty after the manufacturer’s warranty runs out be very careful. There are both legit and scam companies out there that want to sell you a warranty to cover service costs for your vehicle after the manufacturer’s warranty expires. Ads like “Final notice! Your vehicle warranty will expire soon. Don’t be caught without coverage!” They sound good especially when you see some of the phony prices it claims are legit for certain services. Don’t fall for it; we’ll cover some dos and don’ts and what to look for when considering third party warranties.

Third-party warranties offer to cover services that may be needed for your vehicle for a monthly fee. They are not the same as a manufacturer’s warranty that uses original replacement parts and factory-trained technicians. Some of these third-party warranties say they’ll cover service at dealerships but reimbursement can be nonexistent.

Some third-party warranties have real official-sounding names

For use November 2, 2002 papers on telemarketing scams. Boiler_BW03_103102–Video stills for telemarketing feature. (Photo by Bernard Weil/Toronto Star via Getty Images)

Some of these third-party warranties have official-sounding names like “manufacturer warranty replacement program.” The warranty offered has no relation to the manufacturer nor does it have any business related to the product it covers. That would be your vehicle.

Checking with the Better Business Bureau website will help in determining whether the company you are interested in covering your vehicle has an “A” rating or an “F.” It will also tell you whether the company has aliases and how many complaints, if any, have been filed against it. 

There are some real insurance scammers like US Fidelis

Some companies like US Fidelis, which offered third-party coverage before going bankrupt, featured a halo in its logo to infer it was faith-based. It was also known as Dealer Services, National Auto Warranty Services Inc., Dealer Warranty Division, and more, had so many complaints attorneys general in 40 states launched a combined investigation. 

There were over 1,000 complaints in less than three years filed with the BBB. Ultimately, the two brothers that started US Fidelis spent years in prison after being found guilty for fraud and theft. 

Other issues around third party warranties include difficulty canceling the policy, and finding virtually nothing is covered. Exclusions hidden in the fine print can render your warranty worthless as soon as you start making payments.

Here’s what the FTC suggests if you’re thinking about one of these warranties

For use November 2, 2002 papers on telemarketing scams. Boiler_BW04_103102–Video stills for telemarketing feature. (Photo by Bernard Weil/Toronto Star via Getty Images)

The FTC has issued a consumer alert about these warranties. They recommend:

Stick with a manufacturer’s warranty

Research the company before you sign on the dotted line

Know what is being covered and what exclusions exist

If you get official-sounding calls about renewing your warranty be sure who you are speaking with. 

Don’t give out any personal info

Hang up if the solicitor says they can “blacklist” your car from future coverage.

Hang up if it is a recorded message, that’s a sure sign of a scam

Don’t agree to anything-have the solicitor send a copy of a contract for you to look at. 

If it sounds too good to be true-well, you know…

Limited-time specials mean it’s time to hang up.

If you’ve already been scammed here’s what you can do

A scammer is led into the 7th Precinct on Pitt St. in Manhattan on May 18, 2016. | Getty

So, if you’ve discovered after it’s too late you’ve been scammed you can do a couple of things which might get at least a portion of your money back. First, try to negotiate with the company you received the warranty from. If nothing comes from that you can file a complaint with the BBB. The third suggestion is to file a complaint with the FTC. Keep in mind that the FTC will not attempt to resolve your complaint. But, with a number of complaints, the FTC will initiate an investigation that could lead to convictions.