Protect Yourself From Useless Auto Warranties

Editor’s note: Due to some recent confusion, I’m going to add this to each article used in my recent blog carnival. This article is reprinted with permission (given during submission to the carnival) of the author and a link is provided to the original content.

In these tough economic times, everybody is trying to save as much money as possible and extend their savings for as long as possible. But don’t allow this need make you fall prey to fraudulent companies trying to sell you extended warranties. That isn’t to say an extended warranty on your car is a bad idea. There certainly are reputable companies out there who offer extended warranties – from your car manufacturer to an after-market warranty provider – but given the financial difficulties that even some of the major auto manufacturers are facing, you do have to be extra careful in today’s market.

First and foremost, don’t succumb to scare tactics – reputable companies have no reason to engage in these behaviors. For example, be cautious with any postcard or mailer that warns that your warranty may be expiring or says you need to act immediately. The warranty that you have with your car hasn’t changed simply because you receive a postcard. Call your dealer or find your copy of your warranty and check out the terms and expiration dates for yourself before running out and signing up for coverage you don’t need.

Generally speaking, you should never give out personal information like social security numbers, bank, or credit card numbers over the phone to any telemarketer. Be familiar with the warranty you currently have so that you’ll know if you need one or if what’s being offered to you is overlapping coverage. In general, if you think you need an extended warranty, you should research coverage yourself rather than waiting for a company to approach you.

In addition, any extended warranty should have minimal provisions. If there’s a great deal of fine print or a lot of conditions you have to meet before you can access the warranty, you can be reasonably assured that it’s fraudulent. Before spending any money with a company on an extended warranty, call the Better Business Bureau. Many complaints of fraud have been issued against companies selling useless after-market warranties, particularly in the Southeast. Your local Better Business Bureau will have updated records on the companies whose business practices are questionable, enabling you to choose a legitimate warranty provider.

To give you an idea of what you can expect if you don’t do your due diligence, be aware that some of these fraud allegations include difficulty in obtaining payment for repairs, refusal to provide customers with a copy of the coverage before purchase, and failure to cover repairs that should have been covered. To avoid falling into any of these situations yourself, be sure to check a potential provider’s reputation with the Better Business Bureau and on car owner’s forums.

However, know that a warranty need not be fraudulent to be useless. If a company makes promises it doesn’t deliver on, that’s fraud. But, if a company delivers on its promise and it turns out that those deliverables aren’t actually helpful to you, the warranty isn’t fraudulent, but it is useless. Overlapping coverage is probably the largest issue you’ll run into. Before you purchase any warranty, see if coverage overlaps with your existing policy and whether what you pay for the warranty really represents a cost savings over setting the warranty purchase price aside for repairs you might need later on.

From Matthew Paulson at .