Vehicle Extended Warranties Pricey, Yet Often Worthless

Extended warranties are popular among car buyers who maintain low reserves in their bank accounts. Many can afford an extra $35 a month, but a $2,000 repair bill would really set them back.

It might sound good to have an extended vehicle warranty. A little peace of mind might actually be worthwhile sometimes.

However, these products are increasingly under the scrutiny of regulators who claim the companies often do not honor their promises. In the end, it is you the consumer who gets stuck with both the repair bill and the extended warranty premiums.

US Fidelis is one of the most widely recognized extended warranty companies. They marketed their products heavily during 2009 featuring NASCAR’s Rusty Wallace as a spokesperson. His image lent substantial trust to a brand that might otherwise go unnoticed.

Now, US Fidelis has suspended all sales and has filed for bankruptcy protection in Missouri. Its former and current policyholders have little hope of receiving their full claims.

The office of the Attorney General in Missouri is particularly concerned about the proliferation of extended warranty companies that collect fees but fail to pay on valid claims. Attorney General Chris Koster reported that his office is fielding dozens of fraud complaints. US Fidelis is also reportedly facing numerous lawsuits.

If you buy a newer vehicle, you are likely covered under an existing factory warranty. Find out before closing the deal. Also, avoid purchasing pricey extended warranties on any vehicle. These are frequently pushed by car dealers as a way to increase their commissions. You may also receive solicitations by phone or mail from companies that are completely unrelated to the manufacturer or dealer.

You end up paying interest on the total price of the warranty, which increases its cost. Also, there is substantial risk that your premiums will be wasted on a policy that will become worthless by the time you get to use it.

A better option is to divert $50 a month into your own savings account. That way, you can save enough to cover many of your own unexpected repairs. Even if repairs exceed what you have in savings, you can still lean on a credit card to cover the difference.

If you have an extended warranty that is not paying on your valid claims, be sure to file a complaint with the Federal Trade Commission.

Kenneth Long
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Kenneth Long

President at Debtors Unite
Kenneth Long is President of Debtors Unite, Inc. as well as President and Vice Chairman for Vision Credit Education, Inc. He served as a regional coordinator for the North Carolina Saves campaign. Long co-founded the Wake EITC Coalition along with Family Resource Center of Raleigh.

Long is a graduate of the University of North Carolina at Chapel Hill with a B.A. in Industrial Relations. He subsequently received his Certificate in Nonprofit Management from Duke University. His Certificate in Financial Planning was issued by Florida State University.

Long has achieved the Accredited Credit Counselor and Accredited Financial Counselor certifications through the Association for Financial Counseling, Planning and Education. Long originally achieved the Certified Credit Counselor designation through the National Institute for Financial Education.

In addition to years of nonprofit leadership, Long has been an innovator in the field of volunteer tax return preparation programs. He assists volunteer associations and nonprofit organizations who seek to integrate credit counseling and asset-building programs with free personal income tax preparation. His approach to using free credit reports as both an incentive and a screening tool for placement into asset-building programs has been shared with members of the National Community Tax Coalition, the EITC-Carolinas Initiative of MDC, Inc. and nonprofit groups across the Carolinas.

Long assists members of our armed forces in the Carolinas, Iowa, Rhode Island, Georgia and Germany with financial readiness. Please support our Soldiers, Marines, Airmen and Sailors!

Favorite quote:

"The democracy will cease to exist when you take away from those who are willing to work and give to those who would not."

Thomas Jefferson
Kenneth Long
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