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Auto Extended Warranties
The Attorney General provides Consumer Alerts to inform the public of unfair, misleading, or deceptive business practices, and to provide information and guidance on other issues of concern. Consumer Alerts are not legal advice, legal authority, or a binding legal opinion from the Department of Attorney General.
AUTO EXTENDED WARRANTIES
Are They Worth the Paper They Are Printed On?
Do you have a clunker that you either can't afford or can't bear to part with? You are certainly not alone. Despite recent government efforts to increase auto sales and fuel efficiency, many Michigan consumers are holding on to their older vehicles due to financial or emotional constraints. Auto extended warranty companies are using the tough economic times to increase their advertising and their sales in the State of Michigan. Many companies are selling their "extended warranties" as a cost-effective way to repair older vehicles without putting a huge dent in your pocket book. Unfortunately, some consumers have discovered that the "extended warranty" they purchased to help defray repair costs is not really the same as a warranty that comes with a new car from a manufacturer, and also may not cover the repairs that they need.
AUTO EXTENDED WARRANTIES - THEY ARE NOT REALLY WARRANTIES!
Most companies who offer what they refer to as "extended warranties" are actually selling service contracts. According to the Federal Trade Commission (FTC), a "warranty" is a guarantee that comes from a vehicle's original manufacturer, which guaranties their product. You do not have to pay extra for a manufacturer's warranty - it is included in the purchase price of the new (and sometimes used) vehicle.
An "extended warranty" or "service contract" may be offered by a vehicle manufacturer, or they may be offered by auto dealerships or third parties. Extended warranties or service contracts sold or serviced by third parties are not a guarantee on the product from the original manufacturer. Service contracts cost extra - sometimes hundreds or thousands of dollars extra - and their coverage varies. Please note that manufacturers may also sell extended service plans, either at the time of the original vehicle purchase or for purchase at a later date. These plans will cost extra. For details on extended service plans offered by your vehicle's original manufacturer, ask your local dealer for more information or visit your manufacturer's website.
Here's an example that may help distinguish a warranty from a "service contract" or extended warranty. Say you purchased a new vehicle in 2002. This vehicle was covered by a warranty from the manufacturer for five years, or 50,000 miles. You did not pay extra for this warranty - it was included in the overall purchase price of the vehicle. In 2003, your car broke down, and your dealer discovered a problem with your engine. This was covered by your manufacturer's warranty, and the dealer repaired your vehicle for free.
You've now had your vehicle for several more years, and you've put 100,000 miles on it. Your vehicle breaks down again, but this time, the repairs to the engine are no longer covered by your manufacturer's warranty - that expired years ago. However, in 2007, you purchased service contract for $2,000 from someone who solicited your business over the phone. Depending on the terms of that service contract, the repairs to the engine may or may not be covered, or may be partially covered by your service contract.
HOW DO I PROTECT MYSELF WHEN SHOPPING FOR A SERVICE CONTRACT?
If you receive a call from someone claiming to be selling vehicle warranties (or any other product for that matter), get as much information about the caller as you can, such as the company they work for, the time and date of the call, and the caller's phone number. If you are on the Federal Do Not Call Registry, and have been registered for more than 30 days, report this call immediately. Do-not-call violators may be reported at http://www.donotcall.gov.
IF YOU HAVE A PROBLEM WITH YOUR SERVICE CONTRACT, FILE A COMPLAINT:
Consumers who are experiencing problems with their auto service contracts, or who have general consumer complaints, may contact the Attorney General's Consumer Protection Division at:
Consumer Protection Division
Toll free: 877-765-8388
www.michigan.gov/ag (online complaint form)
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