Car warranty scams have become a popular way of bilking car owners. I’ve gotten a couple of these, and they really make me angry. Let’s talk about what they are and why they are dangerous.
My Car
Aside from my home, my car is my most expensive purchase. Many of us take out loans and have high monthly payments for 5,6, or even 7 years for our cars. We want to ensure our car lasts at least as long as the loan, but ideally, for many more years of car-payment-free driving.
Warranty
Every new car in the US (at least that I know of) comes with a warranty of some sort. My most recent vehicle, a certified, pre-owned (CPO), has the remainder of the 3 yr/36,000 mile new car warranty along with an additional 5 year unlimited mile CPO warranty. It makes me feel good, knowing that any major repair required for the next few years won’t bankrupt me.
The Scam
Today, I got the notice below in the mail.
It seems important. IMMEDIATE RESPONSE REQUIRED is in all caps. It’s not requested, it’s required. Must be important. It puts my dealership where I bought the car in the center in big letters so I’ll know it is related to my BMW and my dealership. The coverage ID is MLG383061557. It must be official, it has a coverage ID – right? It’s got a bar code.
They have records, and those records indicate that I have not contacted them to update the service contract. How could I be so foolish?
It’s unfortunate. This notice looks very official. It looks like it is important to me and it is related to my dealership. Many of us would get this and call right away.
Take a closer look
Everything looks legit until you blow up the fine print on the bottom right. I could not read this without scanning the doc and blowing up the text. Here it is:
1st important point. the company is Motor Vehicle Services. I don’t know who they are.
2nd point. They’ve gotten my information from public records. Damn internet – you can get anything these days.
3rd point. This is an advertisement to obtain coverage. It’s an ad!!!
4th and the most important point. Motor Vehicle Services, the company sending me this ad, is not endorsed or affiliated with BMW of Shrewsbury. Huh??? Isn’t BMW of Shrewsbury stamped in big letters front and center on the notice? Oh, look closer, it says in smaller letters above, suggested facilities to choose from, and then BMW Of Shrewsbury.
Is this a scam?
Is it? I didn’t call the number listed, and a search for Motor Vehicle Services didn’t turn up much. That said, would you want to do business with a company that is clearly trying to deceive you? This advertisement is misleading at best and possibly criminal. I sent a copy to my local district attorney. Even if this is a legit company with a legit product, I would not trust them. Would you?
Motor Vehicle Extended Warranties
While we’re here, we might as well talk about extended warranties.
Car Talk
Before we do, I want to mention Car Talk. Years ago, when I had a long commute, I would listen to episodes of the Car Talk podcast. Tom and Ray Magliozzi (read more here) would banter back and forth while taking calls from callers about car issues. Both are MIT graduates. Tom, sadly, passed away a while back. The show is fantastic entertainment and the car advice is great. They also have a ton of info on their website which is kept current. Their tagline is Honest Car Advice, no Bull*&!#. I have found this to be true.
Back to extended warranties. Car Talk had the best and most comprehensive discussion of extended warranties I could find. Click here.
There are legitimate companies that provide a reputable product, and there are valid reasons why a car owner like us may want to purchase one.
Would I buy one?
Probably. In my brief stint selling cars, I sold many. I sold one to my daughter. Why? Most people buying a car would be hard-pressed to come up with $1500 to fix an infotainment system that went belly-up after a year, or $5,000 for a major engine repair. Imagine paying $900 a month in car payments (and probably another $200 a month for insurance) for a car that’s sitting in your driveway undriveable.
If a major repair is going to put your vehicle on the sidelines or may put you in debt. You may want to build the cost of a reputable extended warranty into your budget. This may mean buying a less expensive vehicle.
Another consideration is the quality of the car you’re buying. Toyotas have pretty solid quality ratings from JD Powers, Consumer reports, and other raters. Jeep Wranglers not so much. Wrangler owners tend to love their vehicles and often buy them again and again. If this is you, more power to you, but you may want to consider an extended warranty.
Repair Pal
I love Repair Pal. Not as much as Car Talk, but close. Repair Pal can help you find a reputable mechanic near you, and will tell you the price range you can expect for specific repairs.
My infotainment and instrument cluster replacement will cost $3,000+ – yuck!
Repair Pal will also show you the average cost of ownership for various vehicles. If a vehicle you have your heart set on, like a Wrangler or a Range Rover, has a high average repair cost, it might be worth considering an extended warranty.
Wrap-Up
Back to the scam. Be wary of everything. Sadly, this is the state we’re in today. Whether it is in the mail, on the phone, or through social media, be suspicious. The notice posted above that I received looks like a legitimate piece of mail from a company I trust. I had to get out the magnifying glass to see that it’s not. Teaching finance classes and writing these posts has made me suspicious.
If you do trust an offer like this, be extra careful when calling. Ask who they are. Ask how they got your information. Ask lots of questions before turning over any info. As we’ve talked about in other posts, information is gold. Legitimate companies use our information to target advertising to us, and fraudulent companies use this information to cheat us. Read more here, here, and here.
The opinions and info on extended warranties and my recommendations for car talk and repair pal are a bonus to you for reading. Enjoy.
Very relevant &!informative article. I hope people heed your advice. The average ownership of a car these days is 12+ years. There are no warranties (that I am aware of) that cover that length of time, but like you said – legitimate car warranties have their place. I bought a luxury used car & made sure I protected it (& myself) with a reasonably priced 5 year warranty – from the reputable dealer where I bought the car!
Thanks for the comment Randy!