The Auto Warranty Industry Scam
I’m sure you’ve heard of such companies as US Fidelis, Stop Repair Bills.com, National Dealers Warranty, Or Mogi right? Well about 9 months ago i got hired on at one of these companies above, and i feel it necessary to prevent anyone that reads this from making the same mistake that many of the people I sold to did.
And for those of you that haven’t heard of any of those companies – let me give you a basic run-over of what these companies claim to provide to consumers and how the average consumer would go about getting mixed up in one of these companies. (If you have called one of these companies before, or just want an overall sum up of what these companies are doing wrong, Skip down to “The Scam” section)
Making the call
Lets start this story off with our good friend sue. Now sue owns a 1994 Chevrolet cavalier with 201,331 miles on it.. and its in pretty rough shape. Of course with everyone being on a tight budget nowadays shes a little worried about her old cavalier breaking down on her. Now sue sees one of these Warranty companies on the TV, usually hooking her in with such a phrase as “How would you pay for an unexpected 2000$ repair to your transmission?” and naturally sue wants to plan for the future by giving the company a ring.
The conversation would start off with the Sales rep asking her a for some information, namely her first and last name, her zip code and the VIN number for the vehicle she wants covered. All sales reps that work at these companies are expected to make a “First call, First sale” on every customer. Basically every customer that calls in they have to convince to buy a warranty. The sales reps are not allowed to hang up on any (genuine) customer, either the customer buys a warranty or the customer hangs up. Letting a potential sale hang up, or call back can easily lead to being fired from the company.
The ‘T.A’
Now not all companies use the Take away (or T.A) sales closing technique, but the one i worked for did one for every single customer that called and was Outside of their factory warranty. Generally such practices are not considered very ethical, but are completely legal.
Now since sue is outside of her factory warranty (3 years or 36 thousand miles) the Sales rep is going to tell her this scripted line:
“Now since you are under 250 thousand miles we can definitely cover you, but we DO have a program here that would be covering your more common repairs, for ABOUT the same price, now, Normally THAT program is not available on any vehicle past 200 thousand miles, But… Tell you what.. Since you are barely past it let me check with my manager and see if we can still get you into that program. Hold on please”
After that the sales rep will put you on mute and type in some of your info.. talk to whoever sits in the cubicle next to them.. take a bathroom break… or whatever.
Now it is important that you know.. that 200 thousand mile cutoff the sales rep above said? Basically they are told to make up the closest cutoff point they can. When in reality they were already were going to sell that policy anyways.
For example if sue had 146k miles they would give her a 140k miles cutoff… 199k miles, 190k mile cutoff and so on.
The point of this? It makes sue feel like the sales rep was trying to help her out and she’s lucky she called when she did.. cause she thinks shes ‘getting something she normally wouldn’t be allowed to get‘. It also gives the sales rep more ammunition later on whenever the customer still isn’t buying.
The Close
After all that the sales rep will come back and tell sue (surprise surprise!) His ‘manager’ said that they will be able to make an exception and sue can get the policy! He will continue to explain the policy vaguely usually something along the lines of this.
“The policy I got you qualified for covers your engine, transmission, water pump, air conditioner, 
alternator, starter, and even your power window motors until you reach 301,331 or until (5 years from the day sue bought it) Now with this policy you can take your vehicle in to any ASE certified mechanic nationwide. You will also get Free towing AND a free rental so whenever you have a problem on the side of the road you will be completely taken care of”
He will then explain that this policy will cost her $2793.00 and that he can get her started with just an initial down payment of $299 and her monthly payments would be $144 a month for 18 months, Interest free. Of course that’s allot of money, But sue figures its better than coming up with 2 grand all at once for a new transmission and gives him the credit card numbers.
Now you may be thinking “That really doesn’t sound all that bad!” and I can understand what you mean, other than the unethical sales tactics it doesn’t sound too bad right? Well Thats what i thought until i did a bit of digging on my lunch breaks there..
The Scam
Now there are many different kinds of coverages you can get from one of these companies. The truth is, if your car is over 50k miles, then dont even consider buying a policy from them. Each one of the policies is carefully tailored by the scrips the sales reps read to sound much better than it is, while at the same time not lying to the consumer about What they are getting. for example:
The main policy we sold to the public was the Prolong Plus package and it covered any vehicle under 250k miles for 5 years or an additional 100k miles. Problem is they don’t cover anything that actually breaks down! Not to mention this policy retails for $2793, and we were allowed to discount the policy all the way down to $1400, stretch the payments from 18 monthly payments out to 24 monthly payments, and get customers started with just a down payment of $50! I’ve heard rumors the company pays merely 600$ to the underwriter for the initial coverage!
This is what a sales rep would say when explaining the coverage:
“This policy covers the engine, transmission, water-pump, air conditioner, alternator, starter, and even your power window motors until you reach [additional 100k]or until [5 years from the day the policy was bought] Now with this policy you can take your vehicle in to any ASE certified mechanic nationwide. You will also get Free towing AND a free rental so whenever you have a problem on the side of the road you will be completely taken care of”
When the reps explain the coverage they make sure to leave out several key details:
Actual coverage: (from the contract)
Now, I’m no mechanic, But I know enough about cars to know that the “Internally Lubricated Parts” of your Engine or your Transmission are never the parts that go out..
To give you a better idea:
Quite a difference right? And that’s Just the transmission; Imagine the engine !
All that they told the customer is that it Covers the transmission… not what parts it covers!
That fact makes it completely legal to mislead someone in that manner.
Towing and Rental:
Towing is allotted 75$ worth of coverage and rental 100$ IF one of the Above components manages to go out. Right.
Cancellation Policy:
Reps are told to not tell the customers they are allowed to cancel within the first 30 days AND get a refund… for obvious reasons.
The Money Clause:
And this following part of the contract is the Meat and Potatoes of the scam.. Another detail that the salesmen are told not to tell the customer.
Thats’ right, You read it correctly. 6500$
Or the actual cash value of the vehicle!
That means if your mom took her 88 cadiallac deville with 210 thousand miles on it that’s only worth 1500$ and bought a $2793 warranty for it, the company that she bought it from just got a free 1293$, cause they wont ever have to pay out more than 1500$.
What do you think that Deville would be worth 50 thousand miles into the warranty?
I think were all sick of seeing these commercials.
Spread the word, the last thing our economy needs is people giving money away to companies like these:
Very nice site!
I had a warranty from warranty direct, right after it got passed 36k. Shortly after that my trans. went out. I have a 2004 freestar. The ford dealer said he had never seen a trans. go out before 40k. They claimed that the casing was milled incorrectly and was several mm. off the specs, thus causing premature wear on the internal parts. I had only made the down payment, before it happened. I had a 100 ded. and warranty direct covered the rest= the sum total of 3k plus for the trans and labor. About 3 months after they cancelled my contract and refunded the money I paid. I think because they realized that my contract was less than they already paid out and would only be taking more risk by keeping my contract. Are there any other reputable co. that you can recommend? I would like to get another for the freestar, plus another for a second car I will be purchasing soon. Thank you.
You need think about it. Despite the emails, the overwhelming evidence showing global warming is happening hasn’t changed.
“The e-mails do nothing to undermine the very strong scientific consensus . . . that tells us the Earth is warming, that warming is largely a result of human activity,” Jane Lubchenco, who heads the National Oceanic and Atmospheric Administration, told a House committee. She said that the e-mails don’t cover data from NOAA and NASA, whose independent climate records show dramatic warming.
a fellow telemarketer I take it.
I don’t dial on any of our insurance campaigns when I can help it because there are so many exclusions and loopholes that the company can use to end up not paying you for shit.
The best part is, all the biggest companies love these kind of programs (NUFIC usually writes the policies, the major banks sell them, etc.)
You really should just rename the post “never buy from a stranger on the phone” because even though we’re selling different things, it all works the same way.
btw, I’ve done a bunch of different health, life, accident, and pretty much anything else they can charge insurance for.