How to Avoid Auto Warranty Scams

It sounded to good to be true: an extended auto warranty with low monthly payments and no limits on mileage.  Although there are several quality auto warranties on the market, there are also several scams as well. Know the warning signs to avoid a bad deal that you will regret.

Fraudulent auto warranty companies advertise heavily through the mail, by phone and via email. Before you sign up for an extended auto warranty, ask yourself the following questions:

• What does the warranty cover? An auto warranty does not simply cover "all repairs". Find out in writing what types of repairs the warranty will cover. Does the warranty cover only the powertrain?  Does it cover routine maintenance?


• Who pays in the event of repairs? When you get to the garage, who will pay the final bill? Many people have been surprised that they were responsible to pay a large mechanic bill up front and that the warranty company would reimburse them later. Some customers never receive a reimbursement that they are promised.


• Is there a cap on vehicle mileage? Be wary of companies that have no limit on how old or how much mileage a vehicle has. Responsible auto warranty companies will limit the mileage or age of vehicles that they will cover.


• What kind of history does this company have? Does this company have a long history in the warranty business? Avoid companies that have little history.


• What kind of reputation does the company have? Check with the Better Business Bureau and find out what rating the auto company has. The BBB rates companies from A+ to F. Also, find out if they have any complaints against them and what the resolutions to those complaints were. Check with garages that work with the auto warranty company. Have they had good dealings with them?


• Does it sound too good to be true? The old adage is true: if it sounds too good to be true, it probably is!