Vehicle Service Contract Scams says Carol

VehicleServiceContract Vehicle Service Contract Scams says Carol
A national scam practiced by some in the vehicle service contract industry has bilked millions of dollars out of consumers. The consumers think they are getting a warranty sanctioned by the auto manufacturer. What most of them got was a worthless piece of paper.

The BBB in St. Louis undertook a study of the industry because of the large number of complaints filed with that BBB. The study included a survey of 660 complainants across the country. The study pointed out that the multi-tiered industry — sellers, providers, administrators, insurers and financing entities – cause confusion among consumers. It notes that 64% of respondents to the survey said they did not know the name of the provider of the contract who was responsible for paying claims and 16% thought the provider was the insuring company.

The survey revealed that 92% of respondents felt that the company’s selling tactics were misleading or otherwise improper. While telephone calls accounted for 28% of the first contact with the company, a like number of consumers said they called a company because of TV or radio advertising. Thirty-one percent said they responded to a mail solicitation.

Once a contract was accepted and payments begun or completed, 93% of consumers surveyed said the companies refused to allow claims that they thought were covered by the contract. The average amount consumers spent for those “uncovered” repairs was $1,480, the study notes.

Tips to consider before buying these types of warranties are:


  • Read the contract carefully. Know what is covered and not covered and under what conditions. If the seller won’t provide a contract, don’t buy it.
  • Do the arithmetic. The cost of a contract can be more than the car’s value.
  • Ask the seller the names and locations of the providers, administrators and insurers. Ask how claims are processed.
  • Check all companies involved in the contract with the BBB at


The BBB in St. Louis’s thorough study is a good message to all about this industry.

Have you had any experience good or bad with a vehicle service contract?

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About Carol Odell

Carol J. Odell, is the CEO of the Better Business of Southern Colorado and has been with the BBB for twenty years. Even before her BBB life she was involved in the community as a volunteer and co-owner of a manufacturing business. She is a published author, speaker, wife, mother, and grandmother --- and enjoys all of these roles.