Extended warranties often worthless scams

Some of the worst deals around can be found on those postcards we all seem to be getting in the mail. You know, the ones that “remind” you that your auto warranty is about to expire and offer a deal on a warranty extension.

The “deal” usually costs several thousand dollars. While it purports to cover your vehicle for three, four or even more years, it may ultimately be worth less than the paper it’s printed on.

The mailed version is hard to miss: A bright red banner announces this is your FINAL WARRANTY NOTICE and urges a phone call within three days. Callers are usually directed to send a payment before the company will send anything about the warranty in writing. Those who pose hard questions or even ask for the company’s address and phone number may find themselves suddenly disconnected.

Consumer advocate Robert Krughoff, president of checkbook.org, advises against buying any extended warranty this way. He calls the cost “outrageous,” especially in view of the fact that the “bumper-to-bumper coverage” is often much, much less than advertised.

All of which makes most auto dealers cringe. Thomas Brown Jr. of the Maine Automobile Dealers Association says most organizations offering extended warranties “appear to have nothing more than a bank of telephones and a way to cash a credit card.” He adds, “They’re giving everyone a black eye.” Brown says several of his members have heard from buyers wondering why they would need to extend warranties on recently purchased vehicles. He says he is pleased and relieved when the buyers have disregarded the warranty offers.

Brown says keep your guard up in the following cases:

. An offer is made over the phone. If the company won’t send literature outlining the offer, then it’s probably bogus.

. You are required to send money upfront. Legitimate warranty coverage is not sold this way, and no reputable company would have such a requirement. Such a mandate is usually accompanied by a short deadline, “or the offer will expire.” Let it do so.

Brown has a suggestion for consumers who suspect misleading or fraudulent claims have been directed at them: Forward the information to Assistant Attorney General James McKenna, head of the state’s Consumer Protection Division (6 State House Station, Augusta, 04333).

We like the idea of one warranty industry observer: Avoid the extended warranty issue altogether by creating your own warranty insurance account. The writer (on the Edmunds Car Space Web site: http://www.edmunds.com) urges consumers to set up a separate savings account earmarked for car repairs.

You make monthly deposits (or better, set up an automatic deposit system) to the account, which you will use only if a repair issue comes up. Then you decide if that repair should be “covered” by your warranty account. Many smart consumers will end up with money left over at the end of the vehicle’s useful life. At the very least, they will have the interest the money has earned, which otherwise would be paying for some warrantee scammer’s new golf clubs.

Consumer Forum is a collaboration, now in its 30th year, of the Bangor Daily News and Northeast CONTACT, Maine’s membership-funded, nonprofit consumer organization. Individual and business memberships are available at modest rates. Interested and motivated prospective volunteers are always needed and welcome to apply to help with our mission. For assistance with consumer-related issues, including consumer fraud and identity theft, or for more information, write: Consumer Forum, P.O. Box 486, Brewer ME 04412, or e-mail contacexdir@live.com.