Car repair contracts - Newspaper column

Maintenance/Repairs
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I thought you people would be interested in this Personal Finance column. Very much like extended warranties. (I hope you can see it without subscribing.)
https://www.washingtonpost.com/business/2024/08/02/carshield-service-repair-contract-deceptive-ads/

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This seems to confirm the general consensus of the forum regulars
 These 3rd party extended warranties are bull plop! Don’t waste your money.

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+1
And, finally, one of those companies is going to have to pay big bucks as a result of their deceptive advertising:

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In my area of Virginia, Ice-T, (Rapper and Actor on “Law & Order: Special Victims Unit”) has been pushing CarShield for quite some time and I see his commercials several times every day
 And now Endurance Auto Repair Warranty has moved into this area too with Danica Patrick pushing it


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Just one more example of why I would NEVER buy a third-party warranty. Their track record is full of these stories. Might there be a good one? Who knows! And even if all the paperwork reads OK, they still can go belly up or refuse to pay. That’s why I find articles’ advice to ‘read the agreement carefully’ just as useless as these companies.

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The best point. You can have it repaired by the shop of your choice. Good one. The shop has to be willing to accept the company for the claim. Most places will not fall for the scam. I want to be warranty free even from “good warranties.”

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I’ve always wondered why the local inde auto repair shops don’t offer fixed price repair and maintenance plans themselves, get rid of the profit grabbing third parties. The way I envision this, you drive your 2017 Corolla to their shop and ask them to inspect if for a quote: they tell how many $$ per month to keep everything maintained to spec and do all the non-accident-related repairs? When you buy this plan, one benefit, you get first priority for diagnosis and repairs over folks not having the plan. It seems like a pretty good business model for a shop, but there must be a reason I’ve never seen it offered.

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Because it is a lousy idea . It would take time from their normal business - something breaks or needs repair then the customer is mad because it was not mentioned during the last inspection - the customer might not keep checking oil level because they are paying a monthly fee - the shop can’t repair the vehicle as quick as the customer wants because they are booked for a week or more then customer is mad because they wonder why they agreed to the monthly charge.

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I doubt a local shop wants to take the risk of their first customer coming in with a blown engine after making their first $29.00 monthly payment. This is insurance, the risks need to be spread over hundreds of cars. I can’t imagine an indy shop wanting to deal with that risk. Pre-paid maintenance? Oil changes? sure.

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If they sold 25 to 50 customers a service contract plan, it would only be a matter of time before bankruptcy, too small of an insurance market.

Also, how could they afford to pay for a repair that is needed while the customer is in a different state? $1,000 for an alternator replacement?

What scam? Anyone in the business should understand repair coverage. A power window repair would not be a covered repair for a customer with a powertrain warranty, that is a “customer pay” repair. For a repair shop, it doesn’t matter who pays for the repair, it is work.

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Part of the agreement is that all the work is done at that shop. Customer is on their own otherwise, same as most driving out of dealership warranty cars are now. You are right that for this to work they have to have enough customers.

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New car warranty only has to be done at that brands dealership . It does not have to be the selling dealer.

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That is one reason CarShield has been so successful, there are many repair shops that can perform the repairs.

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No dispute that the car owner is better off if they have CarShield as one option for that service. Which option is best remains to be determined, depends on the owner, their car, how the car is used, etc.

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I have delt with tons of different aftermarket warranty company’s over the years, some are much better than others, but they all pay what is agreed on, after inspection is completed, for the repair cost, if the warranty company agrees to pay $X amount, then when the job is done and with the customers signature, most will pay with a onetime use computer generated credit card number (GSA Fleet pays the same way, or did up until Sep 2021) that is only good for the amount agreed upon, others pay like a national account if the shop accepts national accounts


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Part of the reason Car Shield paid a ten million dollar fine was because the customers couldn’t find a shop that would deal with them. I’m happy to know that some people get paid. Good luck to customers with any warranty company.

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You certainly shouldn’t buy an extended warranty because you think you will come out ahead. CarShield (and others) have actuaries on staff that make sure that their odds are much better than yours.

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I wouldn’t have near the problem if it was just a case of being overpriced. All insurance costs will be greater than the benefit received, on average. The problem is the scam nature of this business. Read the first article in in the initial post. Here’s an example:

"The FTC said that only after purchasing a contract and “authorizing” CarShield to sign it on their behalf did consumers receive their contract, a “dense, 25- to 30-page document, filled with numerous exclusions, terms, and conditions that are not disclosed in CarShield’s advertising or by its telemarketers.”

Despite hundreds or thousands of dollars, consumers were often stuck having to pay for the very repairs they were assured would be covered, the FTC said in its complaint."

So the common advice to ‘read the agreement before signing’ can’t even be followed.

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I cannot read the linked article, as it shows only a few sentences and then the paywall blocks the rest. That being said, I read a similar article on Google News recently, which confirmed my longstanding suspicion–that this company is a flat-out scam. I stand by my longstanding recommendation to NEVER purchase any sort of “extended warranty” plan, or “vehicle repair” plan, unless sold and underwritten by the vehicle manufacturer itself, for example Toyota Care if you’re buying a new of CPO Toyota. Any third-party plan is a scam, plain and simple.

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It’s behind a paywall as others have noted.