When you are looking to buy a warranty there are a lot of tricks some companies or dealers will pull to separate you from your money. If you recognize any of these walk away and find another company.
This trick is also known as “marking up the markdown”. The way it works is they set the warranty price extremely high then offer a big discount to give you the false impression you are getting a really good deal. They might also say it’s a special of some sort, such as a first buyers discount or a president’s day or mother’s day special.
Not one major warranty company offers specials and not one offers discounts. If a company tries this trick on you, hang up the phone because you’re dealing with a marketing company who is only interested in getting your money.
The Under Sell
This is the sales tactic of quoting you a price for a very limited coverage plan when you actually qualify for much more coverage. The trick is they are expecting you to only look at the low price and not how little the warranty actually covers.
The sales person will be very good at making a limited coverage plan sound like it covers much more and they are betting you are more focused on the price rather than exactly what the warranty covers. This is a harder trick to detect but always ask if you qualify for a higher level of coverage.
It’s Bumper to Bumper Coverage - Really
The scam here is telling you you’re getting bumper to bumper coverage when it’s actually far from it. You’ll find this scam used by marketing companies and car dealers.
Bumper to bumper plans are technically called exclusionary policies. The reason is they will only list the parts that are not covered or excluded from coverage, hence the term exclusionary. A bumper to bumper policy covers so many parts it is impossible to list them all in a warranty contract so they will only list the parts that are not covered. If the coverage contract lists parts that are covered it is not a true bumper to bumper plan and you’re being sold something much less.
Always read the policy before you buy it. If the warranty company or dealer will not show it to you walk away. Any respectable company will always show you the policy first.
0% Financing - but Cheaper if You Pay in Full
Most warranty companies offer 0% interest financing and it is true 0% interest. Some unprincipled companies will have a different price if you pay in full. If a paid in full warranty is less money than financing the exact same warranty then there is actually a hidden charge built into the financing making it more expensive. That is not true 0% interest.
Not only is this deceptive, it’s also illegal. This goes directly to a company’s core values and is a dead give-away that deception is more important to them than selling you quality coverage. Never buy a warranty from a company who does this.
As Seen on TV, Celebrity Endorsements, NASCAR Sponsorships
These are not scams but rather slick marketing by companies who are more interested in your money than in your best interests. The TV spots, celebrities, sponsorships and awards are actually all paid for by the company in an attempt to buy respectability. And guess who the costs are passed on to?
Not one of the top warranty companies has TV spots, celebrities or sponsorships.
You Must Buy a Warranty to Qualify for Financing
A car dealer may tell you the bank requires an extended warranty in order to get the loan. This is absolutely not true and illegal. The dealer is really trying to bury a high priced, high profit warranty into the monthly payment.
Have the dealer put it in writing on the loan agreement and they will more than likely back down. Or better yet find another dealer.
Notice in the Mail or Phone Call
If you get an official looking card or letter in the mail that looks like it’s from your car manufacturer or dealership or if it says your warranty is about to expire, throw it in the trash. This is from a marketing company and not the manufacturer or dealer. These are substandard coverage plans and absolutely not worth the money.
Manufacturers, dealerships and respectable warranty companies do not send notices in the mail. However, some unprincipled dealerships do sell your name to marketing companies so it may look like the mail or phone call is from your dealer but it’s actually a marketing company.
Never buy a warranty from something you receive in the mail and never buy a warranty from someone who calls you if you didn’t call them first.
Additional Resources: Where Not to Buy a Warranty, Top Rated Auto Warranty Companies