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Forced Warranties: Don’t Get Pushed Around


Continuing on with exploring auto fraud outside of the online market, this week I want to bring to your attention what is known as a forced extended warranty scam. It actually shares many similarities with the spot delivery and yo-yo financing scams that I explained in my previous post, so this is one to be aware of simultaneously.

The forced warranty scam has been a favorite of car dealerships for many years. Yet despite its “oldest trick in the book” status, it’s still as prevalent today as it was twenty years ago.

In brief, the forced extended warranty scam is dealerships pressuring new customers into purchasing more expensive warranties. After the terms of your purchase and finance option have been agreed and you've returned home to await delivery of your vehicle, the dealership calls to issue you some bad news. The idea is to leverage fabricated external factors which require the negotiation of new terms to your financing arrangement: the bank has insisted you purchase an extended warranty, or it will not issue finance.

Tiffany Ausby-Frazier found out the hard way after purchasing a Nissan Murano through a New York City car dealership. In a letter submitted to the NY Times (David, Segal  - A Warranty She Didn’t Want nytimes.com May 7, 2011 ), she stated:

“When I again asked for a warranty refund, a manager, Keith Chaikin, told me the finance rate I’d received was possible only because I’d bought that warranty. Fine, I said — give me the higher finance rate and return my $2,395. No dice, he said, or words to that effect.”

The reality is that no bank or financing agency has the authority to require you purchase an extended warranty of any sort. Dealerships leveraging these claims or violating federal law and the consumer's rights.

Let me be clear that I do not want to dissuade individuals in the buyers market to be off-put from purchasing a vehicle warranty. These service contracts are useful insurance when purchasing pre-owned vehicles, especially if those vehicles have visible wear and tear or have been involved in a previous incident/insurance write off. It would be considered quite normal for a car dealership to offer warranty terms and seek to include them out of convenience. If these terms are being forced upon you, however, then do not be shy to speak your mind.

In fact, if you’re considering a warranty but want to avoid discussing the process with a dealership altogether, a simple google search will yield dozens of third party services that can offer a solution. Typically, these companies can provide a significantly cheaper rate, anyway.

As I concluded last week, always school yourself before entering the buyers market and wise up to these sorts of scams. Try to void spot delivery and be wary of offers that sound too good to be true. If ever there are additional services or packages offered as part of the deal, consider whether it's something you actually need. Always, always speak your mind and do not be shy to question bills.

 

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