Dealer Fraud: Extended Warranties, Service Contracts & Pre-Paid Maintenance Agreements

Readers of this blog will remember that I have often stated that buying any "after-market" product at the place of sale is usually a mistake. The products are not worth it, and they can almost certainly be obtained cheaper from another source or over the Internet. Pushing and packing in the after-market products is a sign of a dirty dealer and Dealer Fraud.

Several articles and consumer advisory regarding these products have recently been brought to my attention.

The Consumer Reports article sets the stage with which we are all familiar.

After dedicating an afternoon (or more) to test driving, negotiating, and completing a pile of paperwork for your shiny new car, don't be surprised if a bubble-bursting finance manager at the dealer gives a compelling pitch for an extended warranty. It is for your peace of mind, right? Well, not really.

And makes the same observation or warning that I have stated numerous times before.

Clich├ęs about reading the fine print are especially appropriate when talking about extended warranties. The brochure may present the service plan as "comprehensive," but the contract will likely have numerous limitations, such as requiring documented service at in-network shops and covering only certain parts, rather than whole systems.

https://www.consumer.ftc.gov/articles/0054-auto-service-contracts-and-warranties

I can give one an example of the pitfalls that several consumers have called me about. In accordance with the terms of most extended warranties, the warranty company can deny coverage if you cannot prove that oil changes were not done in accordance with the owner's manual - throughout the vehicle's entire life. Well, tell me, how is a consumer going to prove that the prior owner did the required oil changes?

A second Consumer Reports article examines the issue in even greater detail and concluded that purchasing a Service Contract or Extended Warranty or Pre-Paid Maintenance Agreement rarely makes any economic sense.

Consumers capable of putting their emotional worries aside, however, can save money by declining to buy a warranty that's rarely used and not worth the cost for most products.

"From a purely economic standpoint, it usually doesn't make sense to buy an extended warranty," says Rajiv Sinha, a marketing professor at the W.P. Carey School of Business at Arizona State University.

http://www.consumerreports.org/cro/news/2013/07/is-it-worth-buying-an-extended-car-warranty/index.htm

If you think you have been the victim of consumer fraud or Dealer Fraud, then you should contact a qualified attorney immediately.

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