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Once your initial new car factory warranty ends, you’re responsible for paying for any repairs out of pocket. Unless you decide to invest in an extended car warranty, which will cover most car repairs related to mechanical breakdowns. While these vehicle service contracts can be worth the investment, it can be hard to know who the worst extended auto warranty companies are and how to avoid them.
In this article, we’ll explain the types of companies you should avoid, what to look for, and how to find the best deal. We’ll also introduce you to some extended warranty companies that our team found trustworthy and that ranked well in our review of the best car warranty companies.
Worst Extended Car Warranty Companies: 3 Picks
It’s not hard to find examples of auto warranty companies with poor business practices. Schemes have run the gamut from failing to provide refunds to forcing customers into contracts they don’t need.
Here are a few examples of companies that were caught deceiving consumers:
Direct Buy Auto Warranty
In 2015, the state of New Jersey reached a settlement for $810,000 with Direct Buy Auto Warranty. The provider misled customers about warranty protection and didn’t follow through on its promises. The lawsuit alleged that the company violated several state and federal laws, including the New Jersey Consumer Fraud Act, the Plain Language Act, the Corporations Act, and the Regulations Governing General Advertising.
Direct Buy Auto Warranty promoted that its comprehensive warranties paid for most repairs. But what ended up happening was that the policies had so many exclusions customers were forced to pay for repairs out of pocket. As a result of the case, the company was ordered to cease business in New Jersey and filed for bankruptcy instead.
American Standard Auto Protection, also known as ASAP Warranty, was recorded to be out of business in March 2019, based on data from the BBB. This comes after customers launched numerous complaints against the company for not honoring its 30-day cancellation policy. Customers also reported not being able to contact anyone at the company.
The BBB reached out to ASAP Warranty to substantiate customer complaints and all contact attempts when unanswered.
US Fidelis was a third-party company with a bad track record of poor business practices. According to the BBB, the company received more than 1,000 complaints within 36 months. Because of the complaints lodged by customers, over 40 states began an investigation into the company for violating the “Do Not Call” registry and misleading consumers into believing that the company had dealer and car manufacturer affiliations.
At the end of the investigation in 2012, the owners, Darian and Cory Atkinson, pled guilty to insurance fraud, felony stealing, and other violations. Darian was sentenced to eight years in prison, while Cory received a four-year sentence.
Worst Car Warranty Companies: A Complete Safety Guide
If you’ve purchased a new or certified used car, you’ve had a car warranty. Some warranties are better than others, and others are so bad that we can barely see any point in having them. This article will go over ways to help a person spot which warranty isn’t worth buying.
What Is A Car Warranty?
A factory warranty is a promise made by the auto manufacturer to pay for covered repairs and replacement parts during the timeframe specified in the warranty. For new and certified pre-owned vehicles, the price of a car warranty is part of the overall initial cost of the vehicle.
First, warranties simply guarantee vehicle owners protection against high-cost car repairs. For extended warranties or vehicle service contracts, you pay a certain amount of money to the warranty company, which covers the costs of an unexpected mechanical breakdown in the event of a needed covered repair.
Car Warranty Claims Denial
Warranties help prevent car owners from shelling out large sums of money to have their car fixed. However, some companies that sell warranties make excuses to avoid having to pay claims.
For this reason, it’s always a good idea to take the time to read the warranty and understand the coverage provided in your contract before agreeing to terms. Also, make sure to do research the warranty provider before deciding to shell out your hard-earned money for vehicle protection.
Below are reasons extended warranty companies will deny claims:
Wrong policy: Some warranty firms use this as a justification after a customer has purchased a warranty. Due to a failure to read the fine print, a person may wind up with useless warranty coverage. When buying a car warranty, the best thing a person can do is read the entire policy and understand what the guarantee covers.
Exclusions: Again, this is one of those times when the vehicle owner needs to know the full policy of what their warranty covers. For example, the part you may need fixing seems like a no-brainer and is included in your warranty. This may be the case for you, but your warranty may not think so as they have a list of things that will not be fixed on your vehicles, such as a 12-volt battery or headlights.
Incorrect Records: Before honoring your extended warranty, your provider may wish to review your maintenance records. These businesses may reject your claim if they discover that your records are not perfectly kept or you didn’t perfectly follow the recommended manufacturer maintenance schedule. Individuals can usually verify their car history record by marking yes or no on the policy. When the car owner checks the yes box and anything goes wrong with the engine, and the owner can’t produce documentation of oil changes, the warranty company is unlikely to pay up.
Out of Business: This one, of course, is a no-brainer when a company closes and can no longer honor its policy. Unfortunately, fly-by-night companies aren’t uncommon in the extended warranty industry.
Signs of natural disasters. Many warranty companies won’t pay for disasters caused by Mother Nature.
Odometer Tampering. This is another no-no for warranty companies. They won’t honor a vehicle repair if they believe the odometer is incorrect.
Too Many Repairs. Be aware that some mechanics will attempt to get you to make repairs that aren’t necessary. This may cause you problems down the road, and your warranty may not agree to pay for all those repairs.
Car Warranty Red Flags
As you navigate and weed out the worst extended car warranty companies, there are several red flags you should look out for in your search. We’ll explain these warning signs in further detail below.
One of the best ways to avoid the worst extended auto warranty companies is to look into their reputation and see what others are saying. You can look into customer reviews and complaints on consumer websites like the Better Business Bureau (BBB) or Trustpilot or do a Google search on the provider. The company’s reputation will speak for itself.
Note that you should take some reviews or complaints with a grain of salt. But if you are seeing the same issues come up over and over with companies, it may be best to avoid them.
Lack of Industry Endorsements
The best car warranty companies are ones that have been endorsed by industry leaders and celebrities, like Edmunds.com, Kelley Blue Book, and CARFAX. If no one is willing to endorse or recommend a provider in question, you must wonder why.
Car Warranty Plan Limitations
Most vehicle service contracts do not handle every repair, but the most common repairs, such as the powertrain, should be included in your coverage. If you don’t see a component listed, you should assume it’s not covered. You also want to know what a contract’s exclusions are.
The majority of extended warranty providers also do not cover normal wear-and-tear replacements. However, some companies use a depreciation factor when calculating coverage costs. This essentially means that your warranty provider will only pay for replacement costs or repairs if your car is under a certain mileage.
As you’re looking for extended warranty coverage, you need to know what is and isn’t covered before you sign on the dotted line. If something is unclear or a company is unwilling to explain any coverage limitations, you should run the other way.
High Extended Car Warranty Costs
The cost of an extended car warranty is not cheap. In fact, they can be on the pricier side. But at the same time, they shouldn’t cost more than what you would expect to spend on repairs during the length of the contract. Extended car warranty costs usually depend on factors like the coverage level you choose, as well as your vehicle’s made, model, year, and mileage.
We recommend reaching out to the best car warranty companies for quotes. During the process, you should ask questions regarding different coverage levels and pricing to find the best plan for your vehicle and situation.
How to Avoid Extended Car Warranty Scams
YouMail reported that Americans received over 4.6 billion robocalls in February 2021, many of them being warranty car extended calls. The best way an individual can protect themselves against these calls is to identify the caller. Another sign that you are being scammed by dishonest warranty callers is when they offer an unfamiliar insurance policy or warranty that doesn’t seem to have anything specific.
Something else a person should look out for is when they ask for personal identification before they allow you to speak to someone in charge. This is a clear indicator that the car’s owner is being conned. Personal information, such as social security numbers, credit card numbers, and bank account numbers, should never be shared.
Another rule of thumb is to never give out any personal information and stop the discussion. These warranty fraudsters are always looking for new ways to take money as soon as possible.
Look out for fraud if a salesperson pressures you to acquire the warranty. Hang up if this happens.
What To Do If You’ve Been Scammed By A Car Warranty Company
Sometimes it’s not easy to tell if an extended warranty company is legitimate. If you are a vehicle owner who fell prey to an extended auto warranty scam, you have a few options:
Contact The Company
The first place to start is to see what the company can do for you. If you can cancel your warranty contract and get a refund, great. If the company won’t budge or claims you’re locked into payments for some administrative reason, that’s when you should start considering other options.
File A Complaint
If you find the company’s customer service less than satisfactory, consider making a complaint. Customers often post their experiences with companies on consumer review sites like the BBB or Trustpilot.
If that doesn’t get the company’s attention, you can file a complaint with the Federal Trade Commission (FTC), which protects consumers across all industries. The Federal Communications Commission (FCC) also fields reports of scam calls if consumers feel like they’ve been scammed via phone.
Make Some Calls
In the event of being scammed, you want to ensure your personal information is protected. Here’s a list of information scammers often ask for:
Credit card numbers
Social Security number
If you did give out some of this information, call your bank to cancel your cards and protect your bank account. The Social Security Administration (SSA) can also assist if you’re worried about your Social Security number being used for fraud.
Take Legal Action If Needed
When all else fails, you have the option to pursue damages in court. Keep in mind that hiring a lawyer and levying a suit in civil claims court may exceed the amount of money the scammer obtained.
Is an Extended Car Warranty Worth It?
After reading about some of the worst extended auto warranty companies, you may be hesitant about purchasing extended vehicle protection. But if you don’t have a plan after your new or used car warranty expires, you’ll need to be prepared to handle out-of-pocket costs for your vehicle.
While this may not seem like a big deal, costs can quickly add up. Here are a few common car repairs, according to RepairPal:
Airbag control module replacement: $668 to $693
Suspension system replacement: $810 to $910
Engine control module replacement: $963 to $1,039
Head gasket replacement: $1,850 to $2,146
Transmission replacement: $5,091 to $5,290
If you don’t have the cash on hand or the savings to pay for potential repairs, you could be putting yourself in a tough spot financially. On the other hand, with an extended auto warranty, you can make monthly payments rather than paying a lump sum up front.
Here are a few different reasons to consider purchasing extended vehicle protection:
You want peace of mind.
With a vehicle service contract from a reputable provider, you won’t have to worry about car repairs when something breaks. You can also benefit from perks offered by third-party warranty companies, like roadside assistance and rental car reimbursement.
You want to keep your vehicle long-term.
You may think your car is reliable, but you also want to get your money’s worth and get every mile you can. With an extended car warranty, you ensure that all major vehicle components are covered and the systems of your car are protected.
You can’t afford high repair costs.
With a vehicle service contract, you know exactly how much you are paying, whether that is your monthly payment or deductible.
How To Find The Best Extended Auto Warranty Companies
If you’re considering extended warranty coverage but have worries about a potential provider making negative headlines, here are a few tips to find reputable companies:
Company Structure and Financials
Most third-party warranty companies act as brokers, which means they are not the true administrator of your contract. Make sure you research what insurance company backs your warranty, specifically looking at its AM Best financial strength rating. This rating services company assesses each organization’s financial stability and ability to pay out claims to customers.
One of the best ways to identify reputable extended car warranty companies is to read reviews. For many companies, the BBB and Trustpilot have thousands of reviews. The BBB has a systematic scoring system that provides a letter grade based on factors like business ethics, customer service, and claims processing.
Review the Payment Policy
Before you make a purchase, make sure to price out your warranty. It’s common for some providers to ask for the entire cost upfront, although most offer monthly payment plans. Keep an eye out for potential interest charges, as well.
Be Familiar With the Claims Process
To get the most out of an extended warranty, you need to know how claims are approved and when you are entitled to file a claim. It is the customer’s responsibility to ensure the provider has all the information needed to file a claim. Additionally, make sure you are aware of out-of-pocket expenses you are responsible for, including additional fees and deductibles.
Understand the Contract
Most extended car warranty companies provide contracts online. Reviewing the contract is helpful because it allows you to delineate what is covered and what the car owner is responsible for. Along with information about your coverage, sample contracts also include:
Deductible and additional fee information
Eligible repair facilities
Exclusions and restrictions
Worst Extended Auto Warranty Companies: Conclusion
In this article, we reviewed how to identify the characteristics of the worst extended car warranty companies, including ways to spot scams and what to do if you are defrauded.
Best Extended Car Warranty Companies
On the opposite side of the spectrum, there are some reputable extended car warranty companies that offer solid protection. We recently evaluated the most popular providers based on reputation, coverage, customer service, and added benefits. You can learn more about some of our top choices below.
Featured Extended Warranty Companies
We reviewed the best extended auto warranty providers, and here are our top picks.
Endurance is one of the largest extended warranty companies and our pick for best provider. The company is ranked on the 2019 Inc. 5000 list of most successful US companies, is certified by the Vehicle Protection Association, and has an A+ from credit rating agency AM Best. The direct provider offers a wide variety of plans.
Industry veteran that handles your plan directly, from quote to claim
CARCHEX: Best for Used Cars
CARCHEX is one of the best extended warranty providers and has been in the industry for over 20 years. CARCHEX has a score of a perfect 10 on ThoroughlyReviewed and an A+ Grade from the Better Business Bureau (BBB).
As one of the most affordable providers in the industry, CarShield describes itself as “a company and coverage your budget can count on”. CarShield offers 6 vehicle service contracts and even offers coverage for high tech electronics, motorcycles, and ATVs.
Well-known provider that offers great coverage with great pricing
Worst Extended Car Warranties: FAQ
Below are some frequently asked questions about the worst extended auto warranty companies:
How can you identify the worst extended warranty companies?
The worst extended auto warranty companies don’t pay their customers claims for covered repairs and will go through great lengths to shell out money for coverage you paid for.
How do you detect auto warranty scams?
Beware of companies who anonymously ask for your personal information. If you suspect a scam, it is advised to call the Federal Communications Commission.
Who has the best extended automotive warranty?
Based on our research, Endurance offers the best extended automotive warranties in the business. The company received our Best Overall award for 2023 because of its strong customer service reputation and range of plan options.
Why are extended warranties not recommended?
Some people do not have a good experience with extended warranty companies because they are dissatisfied with repairs, the claims process, or require multiple tries to fix it. There’s also the risk that the warranty provider will go out of business.
Our expert review team takes satisfaction in providing accurate and unbiased information. We identified the following rating categories based on consumer survey data and conducted extensive research to formulate rankings of the best extended auto warranty providers.
Affordability: A variety of factors influence cost, so it can be difficult to compare quotes between providers. Our team performs ongoing secret shopper analyses for different vehicles, mileages, warranty plans, and locations to give this rating.
Coverage: Because each consumer has unique needs, it’s essential that a car warranty company offers an array of coverage options. We take into account the number of plans offered by each provider, term limits, exclusions, and additional benefits.
Industry Standing: Our team considers Better Business Bureau (BBB) ratings, availability, and years in business when giving this score.
Customer Service: Reputable extended car warranty companies operate with a certain degree of care for consumers. We take into account customer reviews, BBB complaints, and the responsiveness of the customer service team.