How to Tell if an Extended Auto Warranty Company is Legit

The majority of the American public believes that car salesmen are liars. In fact, when I say "car salesmen" many people respond with these adjectives: evasive, sleazy, dishonest, money hungry, and pushy. Unfortunately, there are reasons for the public's anger and distrust, and, equally as unfortunately, some of the auto warranty sales business isn't much different.

While there are many rotten apples attempting to spoil the bunch, this doesn't mean that the product is tainted, it just means that you need to be on your guard and well-informed before you even think about buying anything. The right auto warranty is a good deal. The key is to find the right one.

To help keep you safe, we are going to teach you how to determine whether a company is legitimate and learn how to read between the lines.

By the way, any company that robo-calls you—you know, those super annoying automated phone calls telling you your auto warranty is about to expire—is breaking the law and should never get your business. The Federal Trade Commission has made robo-calling a crime. And, as of last September, breaking that rule could cost companies up to $16,000 per violation.

The first place you want to look before dealing with any company is the Better Business Bureau (BBB). Next you can check with the Vehicle Protection Agency (VPA) and with your state's Attorney General's office.

Better Business Bureau (BBB)
The BBB assigns grades, and, just like in school, businesses can receive anywhere from an F (failing) to an A+ (perfect). The BBB takes many things into consideration to come up with their ratings (see the entire list: http://www.bbb.org/business-reviews/ratings/ ) but a few things are:

• length of time in business
• advertising issues
• number of complaints received and how serious they are and whether the business has responded to and resolved them
• pattern of complaints and how they have resolved them
• complying with BBB standards

Any company that receives an A or above is most likely trustworthy, those that receive a C or below you should probably stay far away from. When it comes to companies that have a B rating ask yourself this: Why deal with a B company when you can just as easily deal with an A company? Taking that a step further, why deal with an A company when you can deal with an A+ company? In addition to getting an A or A+ rating, a company should be BBB accredited. Being accredited by the BBB means that that company agrees to abide by BBB standards, including making a good faith effort to resolve any consumer complaints.

Very few extended auto warranty companies that sell directly to consumers have received an A+ rating by the BBB—to the best of our knowledge CARCHEX and Warranty Direct are the only two.

Vehicle Protection Agency (VPA)
The Vehicle Protection Agency (VPA) is an association formed to promote transparency, education and accountability in the marketing of automobile service contracts. The group represents firms that are active in the automotive service contract industry. The group has put out a 20-page Standards of Conduct guide ( http://www.vpanet.org/docs/VPA-Standards-of-Conduct.pdf) and conducts third-party company audits to make sure their members are abiding by their standards. For more information see our full article on the VPA.

Attorney General
If you still have questions about a company, it is a good idea to contact your local Attorney's General office. You can easily do a Google search for something like: Maryland Attorney General + extended auto warranty and see what comes up. Click here for more information about lawsuits against extended auto warranty companies and for information about how governments and organizations are working to clean up the industry.