Worst Extended Auto Warranty Companies

Extended warranties are purchased by vehicle owners to provide protection from unexpected, high-cost repairs. The concept is simple; pay thousands of dollars to an extended warranty company, and if your car ever needs to be repaired, your policy will then cover those costs. Since the extended warranty can be financed, those who live on a weekly or monthly budget can better prepare for a big problem that would upset their finances.

But what if you pay those thousands of dollars, and then the extended warranty company won’t pay the repair bills? There are many reasons owners report for why such a company would not pay for a needed repair. We have read endless vehicle owner complaints to get a feel for the most common reasons these companies did not pay. Here are some trends we found:

• Wrong Policy: One common example is when the vehicle warranty that was purchased excluded the needed repair. Since not all warranties cover all types of repairs, some folks find that if they purchased a “Powertrain Warranty,” and the infotainment system needs replacing, or the AC compressor quits the vehicle warranty is no help. And rightly so. These common repairs are not covered by Powertrain Warranties. This begs the question, “why buy a partial-coverage extended warranty?”
• Exclusion Surprises: Sometimes, the part covered would seem to be a logical part of such a warranty but isn’t according to the contract’s exclusions list. An example here might be a clutch failure. Clearly, a clutch is an integral part of a powertrain, but if it is excluded by the vehicle warranty’s fine print, then the vehicle owner is out of luck. Another commonly excluded item from most policies is the 12-Volt battery. Read the entire contract and know its multiple exclusions. Don’t sign it unless you understand and accept its coverage limitations.
• Incomplete Maintenance Records: In this scenario, the warranty company asks to review the maintenance records of the vehicle and finds them to be incomplete, thus denying the claim. This is one common claim denial we can only feel half bad about. Extended vehicle warranties require that the owner maintain the vehicle according to the manufacturer’s recommendations. And that extends back to prior owners as well. That is a fair requirement. Many extended warranty agreements include a check-off box in the contract asking if the records are complete. If the owner checks “yes,” the engine later fails, and then the owner cannot show a history of oil changes, why should the warranty pay out? On the other hand, perhaps the default should be that the owner shares the records with the warranty company before the deal is done to be sure they meet the warranty company’s standards? This area leaves too much to be argued over, in our opinion.
• Scam: The warranty company is a scam and never planned to help in the first place.
• Out of Business: The warranty company is now out of business.

Here are some ways that you can avoid purchasing an extended vehicle contract that will leave you high and dry when the time for that scary repair comes around.

*Based on Better Business Bureau Listings

Watch For Extended Warranty Offer Red Flags

Many organizations want to warn you about warranty scams. The Federal Trade Commission (FTC) is one of them. The FTC offers advice on ways to avoid the worst scams. One of the red flags that the FTC warns about is a company that pretends to be your brand’s manufacturer. The mailing, text, or phone call pitch goes something like, “Your 2016 Forester’s warranty is about to expire! Take action now to keep the coverage!”

The way the pitch is worded leads you to believe that it is your brand reaching out, when it is not. These promotions are created using data the scammer can purchase to get a bit of info on your car. All they need is the make, model, and year to determine when to target you.

The FTC Warns you that if you respond to one of these pitches, “...you’re likely to hear high-pressure sales tactics, as well as demands for personal financial information and a down payment, before you get any details about the service contract. And if you buy a service contract, you may find that the company behind it won’t be in business long enough to fulfill its commitments.”

The FTC Offers This Advice To Avoid Falling For an Extended Warranty Scam:

• Be alert to fast talkers. Telemarketers pitching auto warranties often use high-pressure tactics to hide their true motive. Take your time. Most legitimate businesses will give you time and written information about an offer before asking you to commit to a purchase.
• Never give out personal financial or other sensitive information like your bank account, credit card or Social Security numbers – even your driver’s license number or Vehicle Identification Number (VIN) – unless you know who you’re dealing with. Scam artists often ask for this information during an unsolicited sales pitch, and then use it to commit other frauds against you.
• Be skeptical of any unsolicited sales calls and recorded messages. If your phone number is on the National Do Not Call Registry: You shouldn't get live or recorded sales pitches unless you have specifically agreed to accept such calls, bought something from the company within the last 18 months, or asked the company for information within the last three months.

Warranties to Avoid

One resource that assists consumers in shopping for extended warranties is the Better Business Bureau (BBB). BBB provides help in a number of ways. The first is its BBB Rating. This is an alphabetical scale starting with A+ and going down to F (just like in school). The BBB rating does not correlate directly with customer complaints or reviews of a given business. However, the rating is a helpful way to gauge if the business is real or a scam.

Another tool BBB provides is a listing of the complaints against a warranty company, a response from the company to that complaint, and BBB’s brief commentary on if it was resolved or not. Some of the detailed responses from the companies are very interesting and seem valid.

The third way BBB provides help is a warning not to do business with a given company. This is usually due to a high frequency of unresolved complaints. Here is a listing of some of the companies BBB feels are the worst extended auto warranty companies and why BBB feels that they should be avoided:

• CarShield - Pattern of Complaint: BBB is advising consumers to use caution when considering doing business with CarShield, an Auto Service Contract company. BBB has received a pattern of consumer complaints alleging misleading sales and advertising practices, rude customer service, failure to cover needed repairs, difficulty cancelling a policy and obtaining a refund, and that the firm made harassing calls or sent harassing mail solicitations.

• Department of Warranty Services - Pattern of Complaint: BBB files indicate that this business has a pattern of complaints concerning advertising issues. Specifically, consumers allege receiving misleading advertisements regarding vehicle warranty services from the Department of Warranty Services. In addition, consumers state the advertisement gives the impression the customer is in need of warranty coverage even if they already have coverage through another provider.

• US Automotive Protection Services - Pattern of Complaint: Better Business Bureau is advising consumers to use caution when considering doing business with US Automotive Protection Services. BBB has received a pattern of consumer complaints alleging misleading sales tactics, failure to cancel contracts after a consumer has requested cancellation, high pressure sales tactics, failure to remove consumers from mailing and calling lists when requested, failure to provide refunds and poor customer service.

What to Look For In a Good Extended Warranty

One place to begin shopping for an extended warranty is with the manufacturer who built your car. For example, if you own a Subaru and you plan to keep it beyond the 3-year / 36,000-mile new car limited warranty it came with, why wouldn’t you start with the company that you already know and trust? All brands will sell you an extension to their warranty. Do note that you should reach out before that initial new car warranty period ends.

Whichever company you consider, be sure that the most likely failures and problems will be included in the warranty you purchase. J.D. Power and Associates catalogs the problems that owners report. The group finds that vehicle infotainment system problems are the most commonly reported vehicle system.

Another way you can try to learn what might go wrong is to join forums that discuss your specific make and model. Consumer Reports also has a very detailed listing of most commonly-reported failures by year, make, and model, but it requires a subscription to access. CarComplaints.com offers similar data at no cost.

Before you purchase a Powertrain Warranty extension, or any package that does not cover the majority of the vehicle, step back and ask yourself how you will feel if you buy this expensive policy and the first two things that fail are not included in the coverage you selected.

Reputable Extended Warranty Providers

Although we pointed readers to their manufacturer as a place to start when considering an extended warranty, most car companies won’t sell a policy once the vehicle is out of its new car limited warranty coverage period. So, third-party warranty companies are the only place to turn.

There are third-party warranty companies that have earned a high BBB rating, and positive reviews from owners of the policies. Check out Car Talk’s 7 Best Extended Car Warranties for more details. Three companies we often point to as having high ratings are CARCHEX, Select Auto Protect, autopom! and Endurance.

Our Methodology For Best Warranty Providers

Car Talk has spent the last year doing a deep dive into the warranties industry for the benefit of our readership and long-time listeners. Our process for deciding on the best warranty companies for the year was exceptionally thorough, involving in-depth research and our unique secret shopper initiative. We compiled over 50 data points across all reviewed companies to refine and inform our selection process. Car Talk reviewed the following important criteria for each company:

• Consumer Satisfaction: Cross referencing multiple trusted resources to pull our fair and balanced customer reviews.

• Cost: Utilizing our secret shopper initiative, we got comparable quotes across all companies so we can validly compare pricing.

• Coverage and Offerings: Our research team delved into the coverage and offerings for each company, comparing what is available, including extras and discounts.

• Official Ratings: We consulted a wide range of verified review sites to extrapolate a ratings score for each.

Read more on the Best Extended Warranty Companies in the industry here.