Extended Warranty Scam Causes Dealer Blowback

Robert Farago
by Robert Farago

We've reported that extended warranty scammers (boiler room operations taking thousands of dollars for zero actual coverage) have invaded the Internet and pissed all over the national "do not call" list (at 4am). According to Automotive News [AN, sub], the extended warranty grift is giving franchised dealers conniptions. "Paul Broome, a Cadillac dealer in Independence, Mo., hears from about 10 customers a month who complain about his dealership's high-pressure sales of service contracts. But Broome has nothing to do with the disputed contracts or their marketing. Instead, some peddlers of third-party contracts tap vehicle registration data to reach customers of dealerships such as Broome's by telephone, e-mail and direct mail." The AN article focuses on Missouri, whose Attorney General is pursuing the miscreants. But the scam is sweeping the nation. Still. Question: why haven't dealers and manufacturers sent a pro-active warning to their customers?

Robert Farago
Robert Farago

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  • Yankinwaoz Yankinwaoz on Apr 14, 2008

    A friend of mine has a 1999 Lexus LS that is just going off warranty. He got a call and offer to extend it, and he accepted. I told him about these scams, but he seems unconcerned. Time will tell.

  • 50merc 50merc on Apr 14, 2008

    It's only natural for dealerships to be outraged about con artists taking advantage of people who fear their car will need costly repairs. Peddling grossly overpriced service contracts is a major profit center for dealers.

  • Dave M. Dave M. on Apr 14, 2008
    However, not all extended warranties are scams. Years ago I bought a used E36 BMW 328is from Carmax and their third party warranty was excellent and saved me a small fortune when repairs were required. That's the way I went with my Saab at Carmax. I was rather impressed with their whole routine and how quickly/efficiently my no-pressure purchase went. Although I only wish that once I bought the car, the fee I paid to transfer the vehicle into town should have been refunded. Glad to hear the warranty is worth it, since my Saab just passed out of original coverage.
  • Ihatetrees Ihatetrees on Apr 14, 2008
    50merc: Peddling grossly overpriced service contracts is a major profit center for dealers. That depends on how much you value piece of mind or a stable car cost budget. And yes, years ago, many dealer sold extended warranty contracts were slimy. Now, they're pretty solid. Pricey, but solid.