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If you haven’t received a call warning you that your car’s warranty is about to expire and pressuring you to purchase an extended warranty, you’ve probably heard of someone who has.
The extended car warranty industry is hard for customers to trust:
- Some companies offer legit vehicle service contracts that can cover the cost of unexpected car repairs.
- Others push murky contracts with too-good-to-be-true pricing that might not do anything except take money out of your bank account every month.
- Then there’s the fake warranty offers, often presented over the phone or email, that are likely not connected to any real service contract and could end up putting your financial information at risk.
Here’s how to tell the difference between a real extended car warranty, a serious scam and the grey area in between.
Are all extended warranties a scam?
No, not all extended car warranties are a scam, though they tend to have that reputation. The NerdWallet editorial team shopped for extended car warranties and found a handful of legit third-party extended warranty companies (warranties not offered by the car manufacturer or dealership). These companies provide clear sample contracts, have positive customer reviews, and are accredited by the Better Business Bureau (BBB).
We also found several companies that still offer extended warranties, but raised some red flags: high-pressure sales tactics, no sample contracts, recent bankruptcy and inconsistent pricing information. These companies may not be peddling a true “scam,” but they’re unlikely to give you and your car the protection you’re looking for.
Nerdy Perspective
Extended warranties may be helpful for some car owners, but they’re not necessary for everyone. Weigh the peace of mind an extended warranty can offer against the monthly cost, and make sure to check that the plan you choose has the coverage you need. That monthly cost could go a long way if your extended warranty ends up covering a costly repair, but that amount could also go into a savings account as a car repair fund.
I got an extended warranty scam call – what’s going on?
Extended car warranty scam calls are so pervasive that car owners may be more aware of the fake warranties they offer than actual aftermarket extended warranties.
How it happens: These calls are often prerecorded or automated, and may include specific information about your car that can make them seem legit. They might tell you that your car’s factory warranty is about to expire and that you have to act quickly to extend your warranty by providing immediate payment.
What to do: In general, assume that any caller requesting personal information from you – such as a license number or payment information – isn’t safe to deal with. Don’t share any of this info over the phone. If you’re concerned about your warranty expiration, contact your car’s manufacturer or dealership directly to confirm. Any legit warranty provider should be able to send you a written copy of the policy, so ask for one if you’re not sure.
Extended warranty flags to watch out for
Whether you’re shopping for an extended warranty and coming across fishy behavior from real companies, or trying to identify if the call, email or letter in the mail you just got is a scam, some common red flags should make you pause before proceeding or signing anything. Here are a few warning signs:
- Demands for immediate action. Any time-sensitive pressure, whether it’s from a cold call or an online extended warranty company you requested a quote from, is a signal that the sender might want to push you toward an unwise financial decision. Generally, you don’t need to purchase an extended warranty until your factory warranty fully expires, so don’t rush.
- Unsolicited communication. “Warranty expiration” notices or mailers that aren’t from your car’s manufacturer may have information about your car, but that doesn’t mean they’re helpful. If you didn’t contact the company first – or are unable to get ahold of customer service when you try – they’re likely not legit.
- Murky contracts and policies. A good extended warranty company that is actually providing the service they’re advertising should have no problem providing a sample contract and clarifying their pricing levels to customers. If you’re being asked to input payment information before seeing what you’re signing up for, it’s a red flag. And if the pricing looks too good to be true, it probably is.
- Bad reviews. You can search a company on the BBB website to see if there’s open customer complaints, and check their rating on an A to F scale. Not all companies will have a rating, so customer reviews may help paint a picture. The Federal Trade Commission (FTC) also has reports on lawsuits against companies, which you can search by company on the FTC website. You can also check more informal review sites, like Trustpilot.com and Reddit, to read unfiltered customer experiences.
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