Extended vehicle warranties: How to spot a scam

Buying a vehicle can be a stressful decision. Not only is it expensive, but the mechanics of how the car runs and will hold up over the next few years is difficult to predict and, for the average consumer, impossible to understand.

It’s no surprise, then, how the extended warranty can seem appealing. Here’s someone telling you that there’s this list of things that you won’t have to worry about if something were to fail. And for anyone with experience with cars, things are going to fail.

But are any of the warranties worth it? Are they all scams? What do you need to know before you step onto the lot to buy your next car?

You’ll likely never get your money’s worth

Just like with insurance, you’ll very likely pay more than you get out of it. Of course, that’s always the hope, since no one wants their stuff to break. Especially when it’s a car that is expensive to repair and might be your only way to get around.

For some, however, the peace of mind, is worth it. Knowing that if something breaks that the warranty covers, the repair won’t break the bank.

Stick with the manufacturer

If the security of an extended warranty on your next car is something that is important to you, stick with the manufacturer. While you will likely pay more than you would with a third party, the manufacturer is not likely to disappear when you need them most.

While the manufacturer warranty will be something you can rely on, you’ll still want to make sure you know what the warranty covers and what it does not. Being a savvy shopper doesn’t end with the Kelley Blue Book. Knowing what you’re paying for is critical.

Beware of third parties

Here’s where the scams live. It will seem legitimate. You’ll get a call or a piece of mail from a company that seems to know all about your new car and the expiring warranty. The price will seem better than the one you heard from the manufacturer. Seems like a good deal, right?

Run far, run fast. These are all the earmarks of a scam. In 2016, the Federal Trade Commission mailed out millions of dollars in refunds to tricked consumers who bought buying phony warranties. They were all consumers who, thought they were paying for peace of mind. Instead, all they received were empty promises.

Know before you go

Before you ever set foot on the car lot, know what your plan is. Determine either in your head or on paper, what the must-haves are and what the deal-breakers are. And do not allow yourself to be persuaded. Always be ready to walk away if you start to feel pressured into something that wasn’t on that list. You can always come back after doing more research outside of the high-pressure environment.

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