To avoid car warranty scams, note the differences between a manufacturer’s warranty and a third-party service contract. And to avoid car insurance scams, make sure the agent, the company and the policy are real.
New cars come with manufacturer’s warranties, usually for three years. A few automakers offer four or five years, or even more. Once your warranty is up, however, you’re on your own. Unless you buy an extended warranty. Some manufacturers offer them. It can also be what’s called a third-party warranty. The latter is more correctly referred to as a service contract. That’s because it doesn’t meet the technical definition of a warranty. Basically, these sorts of plans are offered by companies that are not at all connected to your car’s manufacturer. But they agree to pay for repairs to your car in exchange for a monthly or annual fee. Or so you think. Unfortunately, many of these plans are car warranty scams and car insurance scams.
Your car is one of the most expensive investments you will ever make. Possibly second only to your house. And of course, cars break down. That’s something you can expect to happen more and more the older they get. Car repairs can be very expensive as well as extremely aggravating and nerve-wracking. So whether for peace of mind or to avoid potential expense, many people seek out extended protection and insurance plans.
Not surprisingly, third-party warranties are usually cheaper, often much cheaper. But what exactly do they cover? And who does the repair? Do they use new parts or reconditioned ones?
Read the Fine Print
A manufacturer’s warranty will use mechanics trained and licensed by your automaker. And it specifies that it covers the installation of official brand-name parts produced for and licensed by the automobile’s manufacturer. The other guy’s fine print, by comparison, usually allows them to use generic parts and the cheapest mechanics and garages. This of course will have a serious effect on the resulting reliability of your car.
And if you do end up needing any sort of repairs, you may be shocked to realize at that point that the fine print on your contract leaves out whatever it is that’s broken. This happens all the time with car warranty scams and car insurance scams. Significant parts of your car may not be covered at all. The dollar amount for repairs or towing may be capped. Or your deductible may even be multiplied by the number of broken parts on your car.
People who peddle car warranty scams and car insurance scams aren’t stupid. They’ll tell you on the phone that it’s a “bumper-to-bumper” warranty. If you ask specific questions the sales agent knows how to deflect and obfuscate. Pretty soon, you’re paying for something you don’t remotely understand. And the scammer is making all that money, knowing he’ll never have to pay back more than pennies on the dollar.
Scammers Know How to Convince You
Speaking of the sales agent. The sales process is when the worst aspects of extended warranties come to the fore. Beware of car warranty scam calls and car insurance scam calls. Or you may receive an official-looking or frightening letter in the mail warning you that your warranty is expiring or your existing insurance has been abruptly canceled. Callers may even know your car’s model and year. They’ll use misleading language and/or visuals to make you believe that they are in some way affiliated with your automaker. They’ll build a sense of urgency, implying that you could go broke if you don’t take out their warranty or insurance plan.
If you don’t agree to their offer right away, they have the rhetorical tools to get you on board. An amazing deal that expires today, painless cancellation policies, you name it — just agree. Don’t fall for it. Do your research. Check out the company’s reputation. Ask questions in order to be totally clear what they cover and what they don’t. Never ever allow yourself to make a spur of the moment decision under pressure.
Another permutation of car warranty scams and car insurance scams is the so-called “ghost broker.” You’ll find their posts on social media, student message boards and online platforms that appeal to people on tight budgets. Ghost brokers will claim to be independent agents who are able to secure special cut-rate deals with legitimate insurers that will save you a lot of money.
Of course, a lot of legitimate insurance agents claim the same thing and may be able to deliver on their promises too. But scammers find it very easy — and often profitable — to pose as ghost brokers. Apart from throwing out your money on fake car insurance and driving around with a fake car insurance card, victims who then get into automobile accidents will find that they will be haunted long afterwards. First, they will then have a police record as having driven without insurance that will take years to expunge. And then when they try to take out a real automobile insurance policy they will find that the cost will be far higher than expected.
Yes, Operators of Warranty Scams Can Get Caught
So many car warranty scams are phoned to unsuspecting consumers that the U.S. Federal Communications Commission (which regulates telephone services, among other fields) issued a warning that includes a sample of actual car warranty scam calls.
In 2016, the Federal Trade Commission (FTC) went one step further. It ordered 5,970 refund checks totaling $4,255,209 to be mailed to consumers who were targeted with illegal robocalls and, as a result, were tricked into paying thousands of dollars for phony “extended auto warranties.” Not a single one of those warranties actually existed, and victims who asked the merchant for their money back found it was virtually impossible to achieve
The funds represented the amount of money that the merchant and his company, The Dolce Group Worldwide, LLC, were required to pay by court order following the original FTC complaint. To talk its victims into taking out those fake warranties, the Dolce Group Worldwide, doing business as My Car Solutions, told its victims that it was affiliated with automobile manufacturers and dealers. That was completely false. The defendants were then banned from conducting any business through telemarketing.
If you think you’ve been the victim of an extended automobile warranty or insurance scam, contact the fund recovery experts at MyChargeBack.