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.

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