You want extended vehicle protection, but not with a company that’s going to fall short.
Once your factory warranty ends, you are responsible for any car repairs you might face unless you invest in an extended car warranty. The trouble with finding the best providers is that you have to first weed through the worst extended auto warranty companies.
To help you choose the right coverage, we’ve done the legwork for you and broken down what to look for, what to avoid, and how to find the best deal.
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Car Warranty Company Red Flags
As you attempt to navigate around the worst extended auto warranty companies, it helps to know what red flags to look for during your search. Below, we touch on a few warning signs to keep your eyes open for.
One of the easiest ways to research an extended auto warranty company is to look at what other customers are saying. You can examine complaints logged with the Better Business Bureau (BBB) or simply do a Google search on the provider. The company’s reputation is going to speak for itself one way or another.
While some reviews need to be taken with a grain of salt, you can generally get a good feeling for how the company operates with this simple research.
Lack Of Industry Endorsements
Most reputable extended car warranty companies have been endorsed by industry leaders or even celebrities. Edmunds.com, Kelley Blue Book, and CARFAX are all reliable sources of information in the car industry. If no one is willing to recommend the provider in question, you must ask yourself why.
There aren’t many service contracts that handle every repair, but the most common repairs should be included in your coverage. For the most part, if you don’t see a component listed, you must assume it’s not covered. You also want to be aware of what any contract’s absolute exclusions are. For example, some contracts will have fine print, such as the ability to deny your claim if a covered part gets damaged by a non-covered component.
Many extended warranty providers don’t cover normal wear-and-tear replacements, so that shouldn’t necessarily be a dealbreaker. Some apply a depreciation factor while calculating your coverage, though. This means the provider only pays for replacement costs or partial repairs if your car is under a certain mileage.
You need to be clear on what is and isn’t covered before you sign up for any warranty protection. If something is unclear, or the company is unwilling to help you understand the coverage, you should think about running the other way.
The cost of an extended warranty is rarely considered cheap, but it also shouldn’t be exponentially more than you expect to spend on repairs during the length of the contract. Of course, the price depends on what coverage you choose, as well as the make, model, year, and condition of your vehicle.
We always recommend reaching out for several different quotes. During the process, you might learn a lot about vehicle service contracts and what you’re looking for. If one quote comes back much higher than the others, a company might be trying to overcharge you. In the same way, a company with rock-bottom prices could indicate that the coverage isn’t as comprehensive as some of the other plans you’re considering.
Inability To Transfer Plans
The top providers for extended warranties almost always allow you to transfer your plan, although there might be a fee involved. The ability to transfer could increase your car’s appeal during the selling process and give its next potential owner a sense of trust when looking at your vehicle.
How To Avoid Car Warranty Scams
The Federal Trade Commission (FTC) outlines some great steps to steer clear of scams:
- Walk away from fast talkers. A telemarketer pushing auto warranties is going to use high-pressure tactics to hide any faults in the product. Legitimate companies that care about protecting your vehicle will give you the time you need to make a decision and provide you with written information to reference.
- Don’t give out any sensitive information. Unless you know who you’re dealing with, never provide your bank account, credit card, or Social Security numbers. It’s best to hold onto your driver’s license number and Vehicle Identification Number (VIN) too. This data can be used against you to commit fraud. If a company asks for sensitive information while you are simply researching plans, it could be a sign that the company is untrustworthy.
- Beware of unsolicited calls. If you put your phone number on the National Do Not Call Registry, you shouldn’t be receiving unsolicited sales pitches, either from a live person or a recording. If you do receive these, make sure you report them.
3 Warranty Companies That Behaved Poorly
As you do your research on extended warranties, you can learn from some of these companies that are now out of business:
Direct Buy Auto Warranty
Back in 2015, the state of New Jersey reached an $810,000 settlement with Direct Buy Auto Warranty because the provider misled customers about warranty protection and didn’t follow through with promised coverage. The lawsuit alleged that the company violated the New Jersey Consumer Fraud Act, as well as the Plain Language Act, the Regulations Governing General Advertising, and the Corporations Act.
Direct Buy Auto Warranty promoted comprehensive extended warranties that claimed to pay for most repairs. Instead, the policies had many exclusions that left customers paying for the majority of repairs. In the end, Direct Buy Auto Warranty was ordered to cease business in the state, but the company ended up filing for bankruptcy and ceasing operations across the entire country instead.
According to the BBB, American Standard Auto Protection, otherwise known as ASAP Warranty, was noted to be out of business in March 2019. This comes after a number of complaints that ASAP Warranty was not honoring its 30-day cancellation policy and that customers were unable to contact anyone at the company.
The BBB reached out to ASAP Warranty about these complaints and also to substantiate claims of being rated the most trusted extended auto warranty program. Contact attempts went unanswered.
When consumers dial the phone number today, they receive a message saying that the company isn’t taking new customers, and existing customers can no longer receive service. If involved in this scam, BBB recommends that consumers contact their attorney general's office and file a formal complaint against ASAP Warranty.
US Fidelis is another third-party company that had a record of poor business practices. You might remember the provider’s TV ads, which showcased a halo above the logo to imply that the organization was faith-based. It turns out the company wasn’t as trustworthy as it led consumers to believe and is now out of business, according to the BBB.
In 36 months, the company received more than 1,000 complaints with the BBB. Because of these complaints, several attorney generals across 40 states started an investigation. The basis of the inquiry was for violations of the “Do Not Call” registry and misleading consumers into believing that the company had dealer and automaker affiliations.
At the end of the investigation, Darain and Cory Atkinson pled guilty to insurance fraud, felony stealing, and other violations in 2012. Darain was sentenced to eight years in prison, while his brother Cory received a four-year sentence.
Do You Need An Extended Car Warranty?
Looking at the worst extended auto warranty companies can make some vehicle owners hesitant about purchasing extended protection at all. But if you don’t have a plan after your factory warranty ends, you must be prepared to handle any costs associated with breakdowns out of your own pocket.
While that might not sound like a big deal, take a look at some of the more expensive common car repairs according to Liberty Mutual:
- Head gasket replacement: $1,000 to $1,500
- Suspension system replacement: $1,500 to $3,500
- Transmission replacement: $1,500 to $3,000
- Airbag replacement: $3,000 to $6,000
If you don’t have the cash on hand to cover potential repairs like these, you could be putting your financial situation in jeopardy. On the other hand, with an extended warranty, you can make small monthly payments rather than being expected to pay a lump sum without warning.
Here are a few more reasons to consider long-term vehicle protection:
You want to keep your vehicle longer.
Your car model might be dependable, but you want to get every mile out of it that you can. With an extended auto plan, you ensure that all major components and systems of your car are protected.
You can’t afford high repair costs.
With a warranty, you know precisely what you are going to pay, whether it is through the premium or monthly payments and a deductible.
You want peace of mind.
With the right warranty in place, you know you have coverage when something breaks. You can also get a plan with roadside assistance to relieve even more potential stress.
You are going to sell your vehicle
Even if you plan to sell your car in the future, a warranty could greatly increase your car’s curb appeal. Many companies allow you to transfer coverage to a new owner.
Vehicle owners receive countless benefits with trustworthy auto protection in place. The key is finding the service contract that fulfills your needs.
What’s The Moral Of The Story?
If you do your research, you can find a reputable warranty company, but you must be willing to be diligent in your efforts. As with any industry, there are companies out there looking to take advantage of unaware consumers.
Evaluate any potential warranty provider by these criteria:
- Reputation: Research companies with the BBB. A high number of complaints about the same issues could indicate that the company is untrustworthy.
- Customer Service: Is the company responsive? Do representatives allow you time to review the paperwork? Are they able to give you details regarding the warranty coverage and exclusions in writing?
- Coverage: Find out what plans are offered and how these plans can be customized for your specific needs.
- Additional Perks: Does the organization provide roadside assistance, towing coverage, rental cars, or any other extra benefits?
- Claims Process: Can you choose your repair shop? Do you have to pay for the repair costs up front and wait for reimbursement, or does the company handle claims directly?
- Cancellation Policy: Check the cancellation policy to ensure you can change your mind once the plan begins. Many reputable providers offer a money back guarantee.
What If You Have Been A Victim Of A Warranty Scam?
If you’ve been victimized by one of the worst extended auto warranty companies, you should take action. Follow these steps when you don’t get what you paid for with a warranty provider:
- Attempt to resolve your dispute with the company privately.
- If that doesn’t produce results, contact the attorney general of your state.
- File complaints with the state insurance commission and the FTC.
The FTC likely won’t intervene in the dispute, but the information you submit could be used to indicate a pattern of abuse and prompt action from the FTC if violations are blatant.
Our Recommendations For Extended Warranty Providers
On the opposite end of the spectrum, there are some exceptional companies out there for extended protection. We recently evaluated the most popular providers on a number of criteria, including reputation, quality of coverage, customer service, and added benefits. Here are two of the providers that came out on top.
Best Overall Provider: CARCHEX
In our research, we found CARCHEX to be the most well-rounded extended warranty provider. There are a variety of coverage options available, ranging from bumper-to-bumper protection to powertrain coverage for your vehicle’s engine and transmission. For newer vehicles, plans pick up where the manufacturer’s warranty leaves off, and older vehicles are protected, too. Even if your car has more than 100,000 miles, you can gain peace of mind with a protection plan.
No. 1 overall, beating the competition in company reputation, coverage options, and customer service.
As you do your own homework on CARCHEX, you will find that it is a reputable brand with an A+ rating from the BBB, which can be difficult to obtain in this industry. Experts from CARFAX to Edmunds.com recommend to provider. CARCHEX also partners with Mothers Against Drunk Driving to increase road safety and stop drunk driving.
The only way to find out if this provider will work for you is to receive a free quote and review the coverage. If you change your mind later, you can take advantage of the company’s 30-Day Money Back Guarantee.
Most Popular Provider: Carshield
Another great option for coverage is CarShield, who we found to be the most popular provider in the industry. We performed an in-depth comparison of CarShield and CARCHEX and found that the companies have a lot in common, including a high number of plans available.
A great provider with a history of over one million vehicles protected and thousands of customer reviews.
CarShield provides six affordable plans with several tiered options. The provider even has a specific warranty for motorcycles and ATVs. As with CARCHEX, CarShield allows you to choose your repair shop, so you don’t have to visit the dealership for warranty work. The claims process is simple, with CarShield handling payments directly, so you aren’t left waiting for reimbursement.
Performing Due Diligence
If you want to avoid the worst extended auto warranty companies, you must perform your due diligence. Not every plan that industry leaders recommend is going to work for you.
During your process, we suggest that you obtain quotes from multiple providers. In addition to CARCHEX and CarShield, we recommend companies like Endurance, who we recently named Best Direct Provider, and autopom!, who we found to have the Best Quotes and Claims Process. Take time to read through all of the paperwork and ensure you understand the coverage. Only when you feel comfortable with the provider should you commit to an extended vehicle warranty.