Extended warranties have been one of the highest profit customer ripoffs ever seen in the auto industry. Worse yet, with little regulation, they are likely to stay that way. So, what can you do to avoid being ripped off by one?
First, don't buy one. Everyone in the industry knows that the profits are high and the payout is low. No matter what they are wanting to charge you, the odds are that over half that money is pure profit to the car dealer. And if the warranty company's name isn't the same as an auto manufacturer, then you can bet that the profit margin is even higher, probably at least 60 percent and more likely 75 percent of the price is pure profit.
Worse yet, the coverage goes down drastically when it's one of those PO Box warranties. That's what they used to be called in the business because many of them were originally run out of PO Boxes by owners with something of a shady background.
Second, get educated. If you want to get an inside glimpse into how an extended warranty company gets started and makes a pile of money denying claims, take a look at Platinum Warranty and Plantinum Tony, a high-flying operation that collapsed just a couple of years ago. It's an outrageous story of an outrageous man who perfected an outrageous ripoff of what some are calling thousands of consumers. Even the state of Ohio couldn't get back customer's money.
If you know how they operate, maybe you'll have a fighting chance of avoiding the ripoff in the first place.
Third, don't buy one. After all, if that shiny new car has been built right in the first place, then you won't need an extended warranty. Save your money.
Fourth, if you really, really think there's any value in an extended warranty, then don't settle for anything that isn't actually backed by your vehicle make's manufacturer. And haggle over the price. No matter what that F and I salesman is telling you (and you can bet it probably won't be the truth), there's a huge markup for dealer profit in every extended warranty.
Oh, and you think that salesman or the F and I salesperson is on your side? Forget about it. In almost all car dealerships, they are paid strictly on commission. You don't buy from them, they don't get paid. Simple as that. That proves there's a huge dealer profit in extended warranties.
Everyone gets big bucks and you get a fillegreed piece of paper that has about as many holes in it as a kitchen colander.
Don't let a car dealer rip you off. When it happens, don't hesitate doing something about it. Life's too short to put up with a bad car, and you work too hard to put up with a ripoff car dealer.