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Buyer Beware: Extended Auto Warranties

You’ve probably seen those commercials for extended auto warrantieson TV – companies offering to extend the warranty on your car to cover all sorts of repairs and maintenance not covered by the manufacturer after the warranty expiration.

But an NBC News investigation led by Jeff Rossen found that, at least one of those companies – US Fidelis – is grossly misleading its customers. (Watch the accompanying video to see Rossen’s full report, including comments from former employees and the current CEO, defending the company’s practices.)

It turns out US Fidelis has an ‘F’ rating with the Better Business Bureau after receiving over 1,000 customer complaints. One customer, speaking to NBC, said that the company refused to cover her routine radiator repair. Now she’s paying out of pocket for the repairs – even as US Fidelis took her money for the policy – and borrowing friends’ cars just to get to work. Former employees confided that they were trained to lie to customers to give the impression they worked for the car manufacturer and not a third party. The president of US Fidelis, Darain Atkinson, who is a convicted felon, refused to speak to NBC for the report. But the newly-hired CEO, Chris Riley, refutes the claims, saying “US Fidelis at all times is committed to treating its customers with honesty and integrity.”

So how do you avoid getting entangled in a sketchy extended warranty program? Brian Moody of Edmunds.com says the easiest thing to do is just avoid them point blank. The only case where you would even want to consider possibly buying an extended warranty from a third party would be if your car is out of factory warranty, unreliable and expensive to repair. But even then, chances are the extended warranty is only going to cover “moving parts” – meaning parts that are directly critical to the vehicle’s ability to drive, such as engine or transmission parts. Electronics, radiators, heating or air conditioning problems tend to be left out, Moody says.

If you do need to extend your warranty, first try the manufacturer. If they won’t do it, go to a reputable big-name insurance company. But no matter where you go or what plan you choose, ALWAYS read EVERYTHING in the contract to find out what is covered.

Moody also recommends consumers stay aware of the deadbeats. You can usually tell if they contact you first, have tricky names or are super expensive. These are all red flags, he says.