How to Avoid Getting Ripped Off by an Extended-Warranty Auto Contract
Don't buy an extended auto warranty unless you can first read the contract (and have it reviewed by a mechanic). Some third-party providers are scams, using high-pressure sales tactics and misleading BBB ratings to sell coverage that might not be all that it's claimed to be.
Is your car out of warranty? Are you concerned about potentially expensive repairs? Have you heard spots on the radio or seen TV or internet ads from companies offering an extended auto warranty that covers all sorts of expensive repairs on vehicles with expired warranties?
More importantly, are you tempted to buy one of these service contracts? If so, wait! If you do it, you could be ripped off.
While some of these companies do, on occasion, pay for repairs, I've learned from experience that at least a portion of the extended-warranty industry is a scam. (The exceptions are the programs offered by auto manufacturers.)
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
What I've seen myself is backed up by thousands of complaints filed with the Better Business Bureau and state agencies and posted all over the internet.
As of 2025, there were about 400 third-party "auto extended warranty providers" in the United States. Before you decide to work with one, Google it along with the words "scam," "complaints," "fraud" and "failed to refund my money" to get a sense of the customer complaints. If you notice a pattern, don't sign up.
The case is still being litigated, but a consumer fraud suit was filed against Endurance Warranty Services in Illinois in March 2025. The lawsuit alleged that "Endurance does not deliver on its contractual obligations, (its) claim process can take several weeks or months to render decisions on claims, and (it) has denied repair coverage without any justification."
Endurance has denied allegations of systemic bad-faith denials and says that it has paid out more than $300 million in claims since 2012.
The BBB's website notes that there have been "3,666 total complaints in the last 3 years" about Endurance. Yet, as of this writing, Endurance has an A rating from the BBB.
High grades from the BBB help to scam customers
The BBB enjoys a high degree of respect, and hearing or seeing the phrase "A-rated by the Better Business Bureau" is taken as a stamp of approval that we can rely on to trust that particular business.
However, most people do not know that the criteria used by the BBB to award A ratings have little, if any, correlation with negative reviews and complaints. Simply responding to a complaint — regardless of it being resolved — allows a business to retain an A grade.
The result: Some companies that are out-and-out frauds display their BBB A ratings on their websites and in their advertising.
(In prior articles, I have urged that state agencies and the Federal Trade Commission file suit against the BBB, which, in my legal opinion, becomes a co-conspirator through its practice of facilitating consumer fraud by awarding A grades to companies they know, or should know, are ripping off the public.)
Here's my experience with a sales representative from an extended-warranty company that began when I answered the phone on a Friday afternoon and was told wonderful things about an extended warranty that I needed to buy.
'How's your BMW doing?'
"Mr. Beaver, I need to talk with you about your 2019 BMW that is out of warranty, and I am calling from MyAutoGuard that offers an extended warranty that you need."
I get these calls all the time from different extended warranty companies. Sales reps try to build a sense of fear, stressing how expensive major auto repairs can be and how all my worries will be taken away when I agree to buy their warranty. "We are A-rated by the BBB" is regularly stressed in many of these pitches and on their websites.
Immediately, I found MyAutoGuard on the BBB website. It currently has no BBB rating, though the company touts an A rating on its website.
And these comments appear on the BBB site:
- "If I could have left a zero-star rating, I would have."
- "Shame on you scamming elderly people on fixed incomes and making it impossible to cancel."
- "This is another scamming company. All these companies need to be put out of business."
Going over the cost to replace a transmission, engine, you name it, but with MyAutoGuard, I was assured that "covered" items would be replaced at no out-of-pocket expense. I would also get 24/7 roadside assistance, free towing, rental car reimbursement and on and on.
The sales pitch often sounds broader than the contract
Typically, you will hear "full coverage, everything major, just like a warranty from the manufacturer, giving you peace of mind." This could lead you to believe it is "bumper-to-bumper protection" — and they use that term — when, in reality, the contract covers only a narrow list of named components and excludes many of the failures most likely to occur.
When there is a claim, a denial might be based on the vehicle's pre-existing condition, wear and tear, maintenance records or technicalities.
'Great, send me a sample contract that I can take to my mechanic'
I said to the sales rep, "This sounds interesting, but before signing up, I need to read your contract so that I have a good understanding of what I am buying. And I want to take it to my own mechanic for review."
At that point, things turned ugly. I am paraphrasing, but here is what that part of our conversation sounded like:
"Will you please send me a contract to review with my mechanic?"
"Only if you purchase our service."
"So, you expect me to hand over my credit card number without having a chance to understand what it is I am buying. Is that it?"
"You get the contract after the purchase is complete."
"If you buy a home, buy or lease a car or rent an apartment, they give you the contract to read. No one says, 'Only if you pay first will we let you read the contract.' So what prevents MyAutoGuard from sending me a sample contract to review?"
(The sales rep was becoming more and more nasty.) "You get the contract when you buy the warranty! That's it!"
I was tempted to ask for the name and telephone number of his probation officer, as he sounded like any number of con artists I've spoken with over the years, but I restrained myself.
"What happens if, when I get the contract, I discuss it with my mechanic the next day, and he tells me I do not need it, and I immediately notify your company? Will I get my money back?"
"Take that up with customer service!"
At that point, I hung up.
My recommendation
So, to be perfectly clear — and you can quote me to any sales con you speak to who won't send you a contract to examine unless you buy that warranty now — never buy an extended warranty or vehicle service contract, or anything, unless you are allowed to read the entire contract beforehand, without obligation, and have it reviewed by an independent mechanic, an attorney or a family member.
And, remember, no deal is so great that you must accept the offer right now. If you are told that, run!
Dennis Beaver practices law in Bakersfield, Calif., and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com.
Related Content
- Bill Bought a Fridge, and Then His Nightmare Began
- How to Complain and Get Results
- How to Be Your Own Consumer Watchdog
- When Your Car Is Fixed, But You've Still Got the Problem
- Six Things Not to Do if You Want to Resolve a Conflict
