Watch out for extended warranty rip offs!

Dear Chuck,

I bought a car a few years ago from a dealership. It came with a limited one-year warranty. How do I know if any of these extended-warranty offers are legitimate?

Warranty Worries

Dear Warranty Worries,

They say there are now three guarantees in life: death, taxes, and receiving a “final notice about your car’s extended warranty.” It is so common to get these calls or letters that they have become a joke. However, the gullible can fall prey to a ripoff.

An extended car warranty is a service contract between you and a warranty company. Warranties are included in the sales price of vehicles, but an extended car warranty or service contract is not. Some after-market warranties are legitimate, but the vast majority are scams.

I have never purchased an extended warranty for a car or any other product. Many contracts for legitimate warranties have details in the fine print for maintenance or qualifications that make it unlikely that you will ever receive a settlement on your claims. Instead, I recommend buying reputable cars and saving money in a specific account for car repairs and maintenance.

Phony letters

We seem to get phony offers at least once a month. An authentic extended-warranty offer will identify the dealership where you purchased your car. Scam letters do not. Here is an excerpt from the most recent one we have received.

THIS LETTER IS TO INFORM YOU: That if your factory warranty has expired, you will be Financially Liable for all repairs. Our records indicate that you HAVE NOT CONTACTED us to get your service contract up-to-date. You have the option to protect your vehicle beyond the factory warranty. Please respond by… EXTREMELY URGENT AND TIME SENSITIVE – THIS IS NOT A BILL. PLEASE CALL IMMEDIATELY.

Phony calls

You may receive phone calls from so-called “representatives” of car dealers, manufacturers, or insurers warning you that your policy is about to expire. The scammers offer extended-service warranties at the touch of a certain number or by staying on the line. You will then be pressured with talk designed to create fear of out-of-pocket costs for broken or worn-out parts. They may actually have information about your car and warranty to further convince you of their legitimacy. The goal is to gain your credit card information by getting you to purchase the offer. If you do not hang up, or ignore the call, then ask questions, knowing that legitimate companies will provide any information you request.

Unwanted calls are the FCC’s top consumer complaint. In February, the Commission proposed a $45-million fine against a robocaller who made hundreds of thousands of false calls about the pandemic to sell health insurance. Learn how to stop unwanted robocalls and texts here. In addition, join the FTC’s National Do Not Call Registry. Do not join the company’s do-not-call list. Your number could be sold to other companies. Do not answer numbers you do not recognize. Someone who needs to talk with you will leave a message and call-back number. Ignore the instruction to press a number on your phone. This action confirms to scammers that they have reached a working number, so they will call again.

Protect yourself

Use of the words urgent or time-sensitive are red flags. Offers to extend a factory warranty can only be done by a vehicle’s manufacturer. Even if a letter appears authentic, do not call the number given. If you do have an extended warranty, check the details.

Even if a number appears legit and the caller is “professional,” never give information to a telemarketer. Professional criminals engage in caller ID “spoofing,” which falsifies the Caller ID display. Do not provide your social security number, credit card information, driver’s license number, or bank account information.

Should you need a legitimate extended warranty, do your homework carefully! I suggest you check WalletHub’s list of company ratings.

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