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7. The Extended
Warranty Rip-off
In this scam the salesman sells the
customer an over-priced extended warranty on a lease vehicle where the
vehicle is under warranty during the entire period of the lease.
How it Works: Extended
warranties are high-profit items for any sale. According to a study by the
New York Attorney Generals office, dealer markups range from $200 to $900.
It is no wonder warranty contracts are pushed so hard - even when they are
not needed. Here are some of the bogus arguments and gimmicks salesman
will use to trick unsuspecting lease customers into paying big bucks for
unneeded warranties.
- Pitch: "This special price
on the warranty is only available through us at the beginning of the
lease. If you decide to buy the car at the end of the lease the
warranty will cost you much more." Translation:
"Chances are, you won't buy the car at lease-end, so if you don't
buy it from me now, I won't get a bonus."
- Pitch: "This is such a good
deal, we make it a standard item for all vehicles we sell, even
leases." Translation: "All our customers are suckers
and we expect no more of you."
- Pitch: "This is much more
than a warranty. It also covers all of your regular scheduled
maintenance and oil changes. It practically pays for itself!" Translation:
"The $650 warranty I am selling you will save you $90 on oil
changes."
- Pitch: "This extended
warranty will make your car worth more money at the end of the
lease." Translation: "Why should you care? It's not
your vehicle."
- Pitch: "The warranty is
refundable if you turn in the vehicle at the end of lease." Translation:
"I'm going to forget to tell you that the refund is prorated from
the day that you sign the lease so in effect most of the extended
warranty is wasted during the lease period while the vehicle is under
the manufacturer's warranty."
How to Prevent: The
first and most important step in avoiding the extended warranty rip-off is
simple: Don't sign a lease for longer than the manufacturer's warranty
period. If you follow this rule, you completely eliminate the need (and
the cost) of extending the warranty. Remember, when you lease you
don't own the car. If your lease is entirely within the
period of the manufacturer's warranty, there is absolutely no
benefit to you by extending the warranty. By the way, don't
forget mileage when considering a vehicle's warranty on a lease. Most new
vehicles come with a 3-year 36,000 mile bumper-to-bumper warranty. But on
a three-year lease that allows 15,000 miles per year (45,000 total miles),
you could easily find yourself out of warranty in the last year of the
lease.
If you find that you must lease beyond the
manufacturer's warranty (even though we don't recommend it), consider an
extended warranty from a large, reputable third-party company.
For more discussion on extended warranties
and leases see our page on Extended
Warranties.
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