Beware of third-party car warranties, Consumers' Checkbook warns

Auto Shop Extended Warranties mechanic
Posted at 7:24 AM, Sep 16, 2021

Those who haven't received at least one car warranty scam so far this year should consider themselves lucky.

RoboKiller estimates they'll be the top phone scam of 2021, projecting that 13 billion such calls will be placed this year. The company estimates car warranty robocalls will become the biggest phone scam since it started monitoring robocall trends in 2017.

There are plenty of legitimate extended car warrant plans available, but there are differences between the contracts sold by third parties and those sold by new car dealerships.

Consumers' Checkpoint, a nonprofit group, found a lot more third-party warranties might not be worth the money.

"It was page after page of things the policy excludes, and we really had a hard time understanding what it might even cover," said Kevin Brasler, the executive editor of Consumers' Checkbook.

Common exclusions on third-party warranties include exceptions to covering braking systems, exhaust systems and catalytic converter seals.

"Even when the policies do cover a repair you might need, we found that a lot of these companies have thousands of complaints lodged against them with the Better Business Bureau and other consumer agencies about denial of claims," Brasler said.

Consumer's Checkbook also found third-party companies use deceptive sales practices, like robocalls posing as car manufacturers or sending out mailers that make it seem like they're being sent by either the state DMV or the carmaker.

Consumer's Checkbook says extended warranties sold by dealerships have been approved by the manufacturer. There are still some exclusions to coverage, but they don't appear to deny claims nearly as much as third-party companies.

Despite that, consumer experts say it may not be necessary to buy a dealership warranty.

"If you've bought a new car, it's going to come with a three- to five-year warranty, and the new car warranties that exists — those that you get from auto manufacturers — are pretty good," Brasler said.

Brasler says that if a driver notices an issue with a new car, and a "reputable authority" like Consumer Reports confirms that the model has a track record of issues, then it's a good idea to buy an additional warranty.

When shopping for a warranty, Brasler recommends that consumers call multiple dealers and tell them they are shopping around.