How to spot auto warranty scams

The Federal Communications Commission says auto warranty robocalls were the top call complaint filed in 2020,and the trend is continuing. USA TODAY

The other day I called a friend. After a few rings, her old school answering machine answered. “Hello,” I said. “I’m calling today with important news about your car’s extended warranty.”

She picked up immediately and yelled, “Stop calling me!” I had a good laugh, and it’s no wonder that set her off. Auto warranty scam calls have to be the most irritating and intrusive in the history of telemarketing.

You don’t have to put up with robocalls. You might even be able to get compensated for receiving robocalls. Here are five proven methods to make robocalls stop for good; #3 covers how to report robocalls and get compensated.

Scam texts are a real pain, too. Tap or click for the mistake landing you with even more junk text messages. I bet you’ve done this one thing before.

While your car’s warranty might have expired, these calls are deceptive and illegal. I have a few tips to help stop the flood.

How do they get away with car warranty scam calls?

This scam isn’t new, but it has reached new heights. The Federal Communications Commission says auto warranty robocalls were the top call complaint filed by consumers in 2020, and the trend is continuing this year. You can bet these crooks are taking home a ton of money or they wouldn’t use this tactic.

While ignoring the National Do Not Call Registry, scammers are trying to sell you a $3,000 or so car warranty. They lead you to believe that you’re extending your current warranty. This is deceptive and, yes, illegal.

To make things even more frustrating, you can’t simply block the calls. The system spoofs area codes and numbers so that you’re never called by the same number twice.

If you wait for the operator and ask to be taken off the call list, it’s bad news. You have just verified to the robocaller that you’re a real person. That means even more calls.

What if you take the bait and buy a plan? You probably won’t realize it was all a scam until weeks or months later when you have a problem with your car and realize the warranty doesn’t exist.

Security smarts: It’s shockingly easy for a hacker to reroute your calls and texts. Try these secret iPhone codes to see if it happened to you.

What can you do?

Your best move when you realize it’s a robocall is to hang up the phone immediately. There is one thing that you should never do: press any numbers on your phone during the call.

Many of these calls are automated and ask you to press a button to continue or opt out. Don’t do it. Again, this confirms you have a working number, and you will receive even more calls.

Here are a few more steps you can take:

• Protect personal information: Never hand over details like your Social Security number, credit card information, driver’s license number, or bank account information.

• Double-check: If you believe you’re talking to someone from the dealership you purchased your vehicle, hang up and call back using a number you verify on the company’s website.

• Don’t press any buttons: Pressing buttons during a robocall could lead to more. Just hang up the phone.

• Screen incoming calls: If you have caller ID and don’t recognize an incoming call, don’t answer. If it’s important, they will leave a message and you can investigate the number to ensure it’s legit before calling them back. A quick Google search can tell you a lot.

• Be careful with all numbers: Be cautious even if a number appears authentic. Thieves are good at spoofing phone numbers to make it look like a company you can trust is calling.

• File a complaint: While it takes a few minutes, this can help officials track down scammers and end these dangerous calls. You can file a complaint with the FCC here . Or file a complaint with the Federal Trade Commission here .

Use your phone’s built-in features

One quick step you can do now is silence unknown callers. Instead of seeing a robocall come through, it is silenced and sent to your voicemail. You’ll see it in your recent calls list.

  • Go to Settings >Phone.
  • Scroll down and select Silence Unknown Callers.
  • Go to Settings.
  • Then, tap on Block numbers.
  • Toggle the “Block unknown callers” button on to enable the feature.

Note: I recently took my mother to the emergency room. When the doctor in charge tried to call me to let me know how my mother was doing, he went straight to my voice mail. The major downside to “Silence Unknown Callers” is that it truly works, so use it guardedly.

Need a hand with a slow PC, smartphone issues or a software problem you can’t crack? Post your tech questions for concrete answers from me and other tech pros. Visit my Q&A Forum and get tech help now.

An extended auto warranty can be a big help to cover the cost of unexpected repairs. However, there are scam artists out there that just want to take your money. Here are some indicators that you are dealing with a dishonest warranty provider.

They Don’t Let You See The Contract First

Some scammers try to make you pay first, and then let you review the contract later. They might say something like, “Go ahead and send payment, and you’ll get the contract right away.” Maybe they are trying to sell you a low quality warranty – or no warranty at all. You are entitled to review the contract in full before you make any payment or commitment. Don’t be misled.

CARCHEX lets you review all the details without any pressure. Ask all the questions you need before you make a decision. Get a free extended vehicle protection quote from CARCHEX today.

High Pressure Selling

If any warranty provider tries to tell you that you must “buy now” then they are probably scamming you. They might say that if you don’t buy right away, you will be required to get a qualified inspection or a certified odometer reading. You should never be pressured in any way to buy an extended warranty.

Threat Of Blacklisting

This might be one of the most underhanded tactics of all. The dishonest extended warranty provider might tell you that if you don’t buy right away, your vehicle ID number will be put on a blacklist. They will say that this prevents you from getting extended coverage anywhere. Don’t believe it and move on. There is no such thing as a blacklist.

Pulling Big Discounts Out Of A Magic Hat

Let’s say the warranty provider quotes you a price of $3500, and you tell them that the price is too high. Then they suddenly give you a discount price of $2000. These tactics reveal that the company is not transparent. Why didn’t they offer you the discount up front? Or maybe they are going to change the warranty conditions as well without telling you. Beware of sudden extreme discount deals.

Check With The BBB

The Better Business Bureau only gives A+ ratings to the companies that follow strict good business guidelines. If the company you are dealing with has a bad rating or no rating at all, you might consider trying another provider. Also, some companies change their names several times to hide a poor track record, and this info can sometimes be found on the BBB site. CARCHEX carries an A+ BBB rating.

Experience Counts

If a company has not been in business that long, you might want to look for another extended vehicle protection provider. Experience counts especially when it comes to handling and paying out claims.

If any company makes you uncomfortable when shopping for an extended warranty, it’s best to move on and look for another provider. CARCHEX has been in business for over 14 years. CARCHEX was awarded the Top Workplaces Award by the Baltimore Sun in 2011, 2012 and 2013, was a finalist for the 2011 BBB Torch Award for Marketplace Excellence, and was the only business in Maryland to receive the 2012 BBB Torch Award for Marketplace Excellence, which recognizes outstanding businesses and individuals across the country. These kinds of credentials give you peace of mind.

Published in Auto Warranty Articles by CARCHEX on November 12, 2014

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The other day I called a friend. After a few rings, her old school answering machine answered. “Hello,” I said. “I’m calling today with important news about your car’s extended warranty.”

She picked up immediately and yelled, “Stop calling me!” I had a good laugh, and it’s no wonder that set her off. Auto warranty scam calls have to be the most irritating and intrusive in the history of telemarketing.

You don’t have to put up with robocalls. You might even be able to get compensated for receiving robocalls. Here are 5 proven methods to make robocalls stop for good; #3 covers how to report robocalls and get compensated.

Scam texts are a real pain, too. Tap or click for the mistake landing you with even more junk text messages. I bet you’ve done this one thing before.

While your car’s warranty might have expired, these calls are deceptive and illegal. I have a few tips to help stop the flood.

How do they get away with this?

This scam isn’t new, but it has reached new heights. The Federal Communications Commission (FCC) says auto-warranty robocalls were the top call complaint filed by consumers in 2020, and the trend is continuing this year. You can bet these crooks are taking home a ton of money, or they wouldn’t use this tactic.

While ignoring the National Do Not Call Registry, scammers are trying to sell you a $3,000 or so car warranty. They lead you to believe that you’re extending your current warranty. This is deceptive and, yes, illegal.

To make things even more frustrating, you can’t simply block the calls. The system spoofs area codes and numbers so that you’re never called by the same number twice.

If you wait for the operator and ask to be taken off the call list, it’s bad news. You have just verified to the robocaller that you’re a real person. That means even more calls.

What if you take the bait and buy a plan? You probably won’t realize it was all a scam until weeks or months later when you have a problem with your car and realize the warranty doesn’t exist.

SECURITY SMARTS: It’s shockingly easy for a hacker to reroute your calls and texts. Try these secret iPhone codes to see if it happened to you.

What can you do?

Your best move when you realize it’s a robocall is to hang up the phone immediately. There is one thing that you should never do: press any numbers on your phone during the call.

Many of these calls are automated and ask you to press a button to continue or opt-out. Don’t do it. Again, this confirms you have a working number, and you will receive even more calls.

Here are a few more steps you can take.

  • Protect personal information: Never hand over details like your Social Security number, credit card information, driver’s license number, or bank account information.
  • Double check: If you believe you’re talking to someone from the dealership you purchased your vehicle, hang up and call back using a number you verify on the company’s website.
  • Don’t press any buttons: Pressing buttons during a robocall could lead to more. Just hang up the phone.
  • Screen incoming calls: If you have caller ID and don’t recognize an incoming call, don’t answer. If it’s important, they will leave a message and you can investigate the number to ensure it’s legit before calling them back. A quick Google search can tell you a lot.
  • Be careful with all numbers: Be cautious even if a number appears authentic. Thieves are good at spoofing phone numbers to make it look like a company you can trust is calling.
  • File a complaint: While it takes a few minutes, this can help officials track down scammers and end these dangerous calls. You can file a complaint with the FCC here. Or file a complaint with the FTC here.

Use your phone’s built-in features

One quick step you can do now is silence unknown callers. Instead of seeing a robocall come through, it is silenced and sent to your voicemail. You’ll see it in your recent calls list.

On iPhone:

  • Go to Settings >Phone.
  • Scroll down and select Silence Unknown Callers.

On Android:

  • Go to Settings.
  • Then, tap on Block numbers.
  • Toggle the “Block unknown callers” button on to enable the feature.

Note: I recently took my mother to the Emergency Department. When the doctor in charge tried to call me to let me know how my mother was doing, he went straight to my voice mail. The major downside to “Silence Unknown Callers” is that it truly works, so use it guardedly.

NEED A HAND WITH A SLOW PC, SMARTPHONE ISSUES OR A SOFTWARE PROBLEM YOU CAN’T CRACK? Post your tech questions for concrete answers from me and other tech pros. Visit my Q&A Forum and get tech help now.

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Scams aren’t just something for buyers to be aware of— sellers can be common targets, too.

Before you place an ad to sell a used car, you’ll need to be aware of common scams and learn how to avoid them. Use this guide to make your transaction as safe and painless as possible.

Common Scams for Vehicle Sales

Though not every transaction is a potential scam, you will need to use caution when dealing with an unknown buyer.

Common scams you should be aware of when selling your car include:

  • Offers to buy sight-unseen.
    • A buyer offering to buy your car without looking at it first should be considered a warning sign.
    • Often, this is part of a larger scam. The buyer will send a bad check or promise to wire money and have a different person pick up the vehicle.
  • Paying with checks or money orders.
    • While it isn’t always the case, a common scam is to pay the seller with a check or money order that’s fake. If you sign the title over before the money clears, the car isn’t yours anymore, and you’re left having basically given the car away for free.
  • Overpayment.
    • In this case, a buyer will tell you that someone else owes him or her money that is more than the cost of your car. He or she will ask for the car and promise payment from the other individual.
    • Another overpayment scam involves the promise to wire additional funds or send a larger check to pay for the cost to ship. The buyer will send a fraudulent check and ask you to deposit it. If you ship the vehicle before it clears, you’re in for a headache—locating and retrieving a vehicle that has already been shipped is both costly and time consuming, especially if it’s out of the country.
  • Payment plans.
    • A promise to make monthly payments is usually not a good way to go. Since you aren’t a finance company and have no way to collect if a buyer misses or stops payments, it’s best to avoid these offers.
  • Escrow services.
    • In this situation, the buyer will use an unknown escrow service to complete the transaction. It will seem secure, but once you’ve given them the signed title, the money will no longer be available.
      • An escrow service is a third party that is used in high-value purchases to maintain accountability during the transaction. An illegitimate escrow can be used as a scam tactic.
  • Asking for personal information.
    • Some buyers may promise to wire money to obtain personal information, such as:
      • Social Security numbers.
      • Bank account information.
      • Credit card numbers.
    • This may be an attempt at identity theft.

Safe Tips for Vehicle Sellers

In order to avoid these common scams, use these tips:

  • Verify checks before you transfer the title.
    • To be safe, verify checks with the issuing bank instead of waiting for the check to clear with your bank. If possible, complete the transaction at the buyer’s bank to be sure the funds are available.
  • Don’t ship cars overseas until all payments clear.
  • Be wary of unknown escrow services.
    • A third-party escrow can be a good way to make a safe, secure transaction—just remember that you’ll want to use areputable lawyer or bank.
      • Don’t agree to use an escrow as part of the transaction until you’ve researched the escrow service first.
      • If you aren’t sure, the Better Business Bureau can help.
  • Document everything.
    • Make sure you keep a copy of anything that’s signed.
    • Document the entire process and keep records of phone numbers, names, and other information.
      • This will help if an investigation is required down the road.
  • Screen callers.
    • This will help you to only accept test drives from potential buyers that are legitimate.
    • If you think it’s a scam, it’s best to end the conversation sooner rather than later.
  • Ask for a driver’s license.
    • If you do let someone test drive the car, ask for their driver’s license first. This will let you know exactly who you’re dealing with.
  • Meet in a public place.
    • For safety, it may be a good idea to not conduct the transaction at your residence.
  • Don’t sign over the title without the cash in hand.
    • Most scams occur from fraudulent checks, money orders, or money wiring.
    • Never give a buyer the vehicle or the title until payment has cleared.
  • Don’t accept monthly payments.
    • You’ll have no way to collect if a buyer fails to make scheduled payments or stops them all together.
  • Complete transfer forms.
    • In addition to signing over the title, it is also recommended that you complete a:
      • Bill of Sale.
      • Release of Liability (often provided or even required by your state).
    • This will protect you from future tickets, violations, or other problems incurred by the new owner.
  • Block out personal information.
    • If you give a buyer service records, you’ll want to block personal information such as:
      • Credit card numbers.
      • Phone numbers.
      • Social Security numbers.
      • Other information that could lead to identity theft.
  • Use your best judgment.
    • In most cases, if you think it’s a scam, it probably is.
    • Instead of jumping at the first offer, it’s best to be patient and wait for the right buyer to come along.

Where to Report Fraud

If you believe you’ve been the victim of fraud, you can report the incident to any or all of the following:

  • Local law enforcement.
  • The Internet Crime Complaint Center.
    • Partnership between the Federal Bureau of Investigation (FBI), the National White Collar Crime Center, and the Bureau of Justice.
  • The National Consumers League.

Everyone loves shopping for a new car. Actually, no one does. It’s right up there with looking for an apartment in the cold of winter or pricing caskets. The only part that’s fun is test-driving a car you know you would never buy. But that’s not really shopping. That’s borrowing someone’s car for a joy ride.

When it comes to comparing model specs, looking for discounts, factoring in finance terms, understanding fuel economy quotes, and looking at resale value (matching pre-owned versus new models), there is little to love about the car buying process. It only gets worse when an unethical auto dealer is trying to put one over on you. Then it’s anarchy.

However, you still need a car. The best way to proceed is to do your homework and never rush into any purchase. To help with dealers out to scam unwitting consumers, CarBuyingTips.com compiled the 10 best (or worst) car dealer scams consumers should have on their radar when walking into a dealership. Here’s a look at the scams you should be ready to avoid.

1. The lost financing scam

Signing a deal for a new car is foolish if you don’t have loan terms locked in already. Leaving the dealership in a new car with on-the-spot financing leaves you open to this scam. After a few weeks, you learn from the dealer that your loan application was rejected. Now you have to accept a higher annual percentage rate (APR) on the dealer’s new loan because the original rate is no longer available.

In reality, any rate that was pre-approved with an accurate credit score should go through. CarBuyingTips.com pegs 680 as the Mendoza Line for credit scores. Below that figure, you are getting a higher rate. Above it, you get the optimal rates. These days, there are so many free credit score services that you should go in knowing your number. If you have a credit rating below 680 but the dealer offers you an extremely low rate, the “financing evaporated” scam may be in the works.

2. The ‘your credit sucks’ scam

In this scam, dealers suggest your credit has seen better days, downgrading it by a hundred or so points. That gives them the right to give you a worse financing deal and pick up some extra cash on the loan. Of course, this scam is easily avoidable if you check your credit before you head into a dealership. When the dealer says he wanted you to get a better deal but your credit score was 640, you can call him out on the lie. Before you left the cozy confines of your home, your saw your credit rating was higher.

3. Car dealer never pays off trade-in loan

Trading in a car with a loan balance opens you up to some risks. CarBuyingTips.com shows where it’s most dangerous: when a car dealer “forgets” to pay off the loan and you are stuck with the balance because you never got the paperwork. A car ought to be paid off in full if you are trading it in or otherwise be sold to a buyer on the open market. Dealers would be especially shady if they tried this scam, but it has been done in the past.

4. The co-signer scam

Let’s say you are having trouble getting a loan for your car, for whatever reason. A dealer might suggest you just get a co-signer to obtain approval and head down the road. That solution might sound appealing until you realize that the co-signer with good credit ended up being the only one with the loan. It’s a scam because you wouldn’t have gotten the car without that loan and wouldn’t have gotten the loan without someone else’s credit. Catch this one before it’s too late by reading paperwork carefully. The co-signer is the one at risk.

5. The ‘online lenders are deadbeats’ scam

If you roll into the dealership with a pre-approval and blank check from an online lender, you should be on your merry way once you choose the right automobile. Unfortunately, you may find your dealer refusing to accept the check because he claims online lenders are deadbeats who always bounce them. Then he will hit you with a loan package at a higher APR. His scam is convincing you other people are trying to scam him. It’s creative, but you can blow up the scam by walking out on the deal.

6. The warranty scam

CarBuyingTips.com identifies two warranty scams that are fairly common. In the first, dealers hit you with a forced warranty for several thousand dollars that supposedly comes from the bank (it doesn’t). In the second system, a warranty is sneaked into the terms of your deal so it inflates the monthly price. Forced warranties are illegal, so call the bluff and tell them you want to take it home and run through it with your attorney. The terms will change immediately.

7. The dealer prep scam

“Dealer Prep” fees are supposed to compensate dealers for the exhausting work done in the trenches after your car arrives off the truck but before you drive it off the lot. According to CarBuyingTips.com, that amounts to removing the plastic covers from the seats and windows. That would hardly be worth the $600 you might see attributed to “Dealer Prep” in a line on your invoice. This fee is almost always negotiable. Again, it is a fee that will be reduced or disappear if you take the deal off the table.

8. The trade-in loan payoff scam

This scam is mostly out in the open. A dealer offers to pay off your lease or existing loan so you can ditch your old ride and get yourself into (cue the Bob Barker voice) A NEW CAR! You are still paying the remainder of your loan and any penalties involved with breaking a lease, so you’re doubling down on payments in the end. CarBuyingTips.com says dealers typically try to sneak in longer financing terms (six, seven years) in order to get the payment near or even below your current monthly bill.

9. The no-warranty wrecked car scam

Why would anyone buy an as-is, no-warranty car from a dealership? You might as well pick a seller off Craigslist blindfolded and accept whatever terms are being offered. In the no-warranty scam, wrecked cars are gussied up to look like they had a long weekend rather than a funeral. There are ways to check where a car came from and whether it was totaled in the past. If you see the no-warranty offer on a car, chances are it is one of these vehicles.

10. The refinancing scam

In the 10th and possibly most sinister scam CarBuyingTips.com documented, the dealer calls you sometime after the car is in your possession. He congratulates you on this being your great buy and, not for nothing, says he’s got a way better financing package available. Say you pay $350 a month; well now he’s got a deal to make it $305. All you have to do is get back in the dealership, sign some papers, and you’re living on Easy Street.

If you fielded such a call, you would probably wonder how you were so lucky. The opposite was true. All the dealer did was extend the term of the loan to get you paying a lower amount for a longer term. Yes, the APR went up in the new deal. It’s one nasty scam, but just one of many out there in the auto consumer jungle.

Do you often get calls from unknown numbers asking you about your car warranty? If your answer to this question is a ‘Yes,’ then you must read further to know why you receive these calls, how to stop and block these calls immediately.

Why do I keep getting calls about my car warranty?

If you’ve got a car and its warranty is about to expire, you may receive such calls. However, know that calls from unauthorized numbers are fraud calls or rob calls to get money out of you. Beware of these calls and never give out your personal information including, your credit card number, your driving license number, etc. Moreover, if you don’t know how to detect if the call is legitimate or a scam, don’t worry, we have laid down a few pointers that will help you determine the authenticity of these calls.

How to detect fraud car warranty calls?

Although you may not be able to detect who is behind these fraud calls, you can easily distinguish between the real and fake ones. Here are a few characteristics laid out clearly to help you out.

You will see the first red flag if the person on the other side is not a human, but an AI operated robot. In 2019 Federal Trade Commission refunded around 3.2 million people who became the target of the swindlers. Be cautioned, no matter if the robot on the other side of the call tells you all about your car’s make, model, year, and tries to get your information out of you, don’t give anything, cut the call.

Moreover, the car warranty scams are now becoming much more realistic. Fraudsters are using real people to defraud you instead of a robot. Even if you get a call from a human who tells you about the expiration of your car warranty and pressurizes you to buy it, it would be better to leave it.

Apart from this, many fraudsters ask you to pay for information when you ask them to mail you a detailed document regarding their offer. If you come across any call like this, never buy their scheme or you would regret it later. There are fear mongers as well, who will tell you that if you don’t buy their policy, you will have to face the consequences.

Know all of these signs are of a fraud car warranty call. Never buy their idea. Furthermore, if you are tired of cutting these car warranty calls and want to stop these once and for all, then don’t wait, do it. If you don’t know how, read further.

How to block car warranty calls?

Receiving automated calls and especially fake car warranty calls is just angering and irritating. However, you will not face the same issue again. Here is how you can easily block these numbers and save yourself.

The first thing you must do is if you are getting repetitive calls from the same number, never pick up any. If you will pick it up once, your number would be listed under hot leads number, and a paid data provider will give away your number as a potential lead to anyone and everyone who seeks it.

However, if you are past that stage and you picked a call once; now it is becoming your life’s hurdle to avoid them. Register your number on the do not call list. There is no rocket science involved, nor does it cost you anything. All you have to do is visit the official website of the National Do Not Call Registry and register your number there.

Even after doing this, the results are not up to your expectation, then gather your courage and file a complaint against the number on the Do Not Call Registry website. For this, you will have to fill out a form that would require you to provide pieces of evidence that a particular company or number isn’t honoring your request not to call. Moreover, you will also have to testify if the call was from a person or was it a robocall.

However, even if this trick doesn’t work out for you, then you can file a complaint to consumer reporting agencies such as Better Business Bureau.

Conclusion

Above, we have told you everything about potential car warranty scam calls and how to block them. However, know that not all car warranty calls are fake or swindle. Some are legitimate and authoritative. Before you take any further steps, be sure that the number you are trying to block is a scam.

I Didn’t Agree to Buy That

How to spot auto warranty scams

Also known as the “Back End Products Scam,” this scam relates too anytime a dealer sneaks in extra finance products, such as an extended warranty, into your car loan without disclosing them to you at the time of signing the contract.

Table of Contents

  • What is the forced extended warranty scam?
  • How the scam works
  • How a dealer may attempt to set you up
  • How an auto warranty affects your payment
  • How to avoid the forced warranty scam
  • What if you’re a victim?

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All Car Dealer Scams

Forced extended warranty scam explained

The scam is most commonly attempted when you’re about to sign the paperwork for your new (or used) car. The finance manager tells you the lender will not approve your loan unless you purchase an extended warranty and/or GAP insurance, credit life and disability, or some other back end product the dealer’s selling.

Never let a car dealer tell you that you must purchase an extended warranty before lender will approve you for a car loan. This is false and illegal.

The forced warranty or back end products scam is normally used on car buyers trying to finance a vehicle with a poor or bad credit. Dealers know people in these situations are in need of a transportation and just excited about being approved. This makes it easier to convince someone in need of a car to fall for this scam. However, this scam may also be used on people with good credit also.

How to spot auto warranty scams

How the forced extended warranty scam works

You visit some car dealerships shopping for a new car. After looking around you finally find the perfect car you’d like to buy. You go inside the dealership and do the back-and-forth with the car salesman and his manager for a couple hours. Finally agreeing to a price, you’re about to meet with the finance manager and sign all the paperwork. Now all you can do is sit and wait, when you really just want to drive your new car.

You finally get into the finance office and meet with the finance manager. He tells you the lender will not approve you unless you purchase an extended warranty for the vehicle. He explains further and explains to you the lender wants to make sure you can still afford the payments if you have any unexpected repair costs because of a mechanical breakdown.

There are several different excuses a finance manager may tell you why a lender is requiring you to buy an extended warranty or other high price back end products.

If you’re buying a used car he may tell you the lender is requiring you to purchase an extended warranty because of the excessive miles on the vehicle and the lender wants to make sure that you can still pay for the vehicle by having protection if the vehicle was ever to breakdown.

With the price of new cars, this explanation is starting to become more popular when attempting this scam. The lender is requiring you to purchase an extended warranty because of the extended term of your requested car loan.

If you refuse all back end products – If you refuse to buy back end products from a finance manager. Be careful with the unethical F&I Managers out there, they may resort to deceitful tactics using statements like:

  • “If you purchase an extended warranty and GAP insurance also. I can get you a better interest rate and approval because you’re protecting the lender.” LIAR! He’ll just move the numbers around to give you the illusion you’re getting a better deal.
  • “I worked very hard on your car deal. The only way I could get your deal approved was by adding an extended warranty and GAP insurance to the deal.” LIAR, LIAR Pants on Fire!

By Law, a lending institution cannot require a customer to purchase an extended warranty, GAP insurance, credit life, disability, or any other backend finance products.

Please don’t make the mistake and think I believe purchasing an extended warranty or GAP insurance is a bad decision. I believe they’re very good products and will protect you if something was to go wrong with your vehicle. Back end products such as these are optional and it should be your choice to buy them or not.

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Some car buyers want extra protection, but these plans aren’t for everyone

Car buyers crave reliability: 95 percent of new- and used-car shoppers rank it high when choosing a car, according to a national survey conducted by Consumer Reports. But for many shoppers, even knowing which cars are trustworthy isn’t enough. They want protection.

Vehicle service contracts, often referred to as extended warranties, are a tempting option for consumers who buy a used car or for those who want to extend the bumper-to-bumper coverage on a new car.

No matter the exact type, extended warranties are an investment in peace of mind that limits financial risk for a set period of time. But beware: A CR member survey conducted in 2013 showed that car owners typically paid more for the coverage than they got back in direct benefits. This isn’t surprising, because extended warranties make a lot of money for those who sell them.

“The fact is, extended warranties are overpriced. That’s the reason people sell them, because they make a bundle on them in commissions,” says a money expert and radio talk show host, Dave Ramsey. “I don’t recommend buying extended warranties, ever. If you can’t afford to repair your car, then you can’t afford the car.”

Instead, Ramsey recommends that owners create an emergency fund for repairs that they can tap into when needed. And if that money isn’t needed for repairs, it can go toward the purchase of the next car.

If you do want to purchase an extended warranty, remember that the price can be negotiated, just like the purchase price for the car.

Extended warranties may reduce financial stress for those who own models from unreliable brands. They’re available through dealerships, auto clubs, and insurance companies (which sometimes call them mechanical breakdown insurance). The plans can vary in length of time, what they cover, and price. And the small print truly matters, because aftermarket programs have specific limitations on what repairs are covered and where the work can be done.

The best time to purchase protection for newer vehicles is while they’re still under the original factory warranty, according to AAA. This helps keep the cost down, and you can get a greater selection of longer coverage terms.

For those driving used vehicles, usually the best coverage options are for vehicles with under 80,000 miles. The club recommends that used-car buyers factor in how long they plan to keep the car; how many miles they drive annually, and whether they can afford to pay for repairs out of pocket. AAA’s average claim is $850.

The national auto club offers a vehicle service contract that combines warranty protections with extra services, such as battery replacement, trip reimbursements, and rental-car coverage. AAA told CR that 30 to 40 percent of their customers require at least one covered repair.

From a pure numbers standpoint, the smart money is on skipping the protection and instead focusing on buying a model with better-than-average predicted reliability, and then properly maintaining it. Before buying a new or used car, check our reliability ratings.

If you do want to buy an extended warranty, be sure to purchase one from a company with a long history, such as through an automaker, and understand the small print. There are often many restrictions with extended warranties, including what’s covered and where the vehicle can be serviced.

Robocalls pitching extended warranty services are rampant. We recommend being skeptical of any cold call offering such protection.