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Used Car Warranty Broker Scheme Rips Buyers Off

American Government Special Collections Reference Desk

Used Car Warranty Broker Scheme Rips Buyers Off

Tom Andrews
August 2, 2007


Recently I received a e-mail from a used car warranty salesman who works for a broker. Seems he wanted to share a rather elaborate scheme his company uses to get you to pay the highest price they can extract from you.

The extended auto warranty company uses direct mail. Those receiving the letter call a toll free number and a salesman answers. Nothing wrong so far! The salesman will ask you a few questions and then tell you that he needs to transfer you to a manager to see if your vehicle qualifies for coverage. Hmmm? There's no reason to transfer you to another person. The same person can find out how old your vehicle is and how many miles it has to determine if it qualifies for a car warranty. However, this manager will ask more questions before saying he's made an exception for you. But, you have to buy on this phone call since he's made an exception. Yeah, right!

You guessed it, every vehicle qualifies. I'm told they consider this the most important part of the process and the manager can take several minutes to get you prepared for the salesman to take the phone call back. They've gained commitment from you.

When the salesman takes the call back, he has a script to make you a warranty price offer. Some people buy at this point and the salesmen call it a "lay down". The problem is they've paid as much as $800 to $2000 too much.

But, what if the caller declines the warranty offer? Well, the salesman isn't going to give up. First, he will continue trying to get the sale by comparing the cost of the warranty to repair costs. Some more people buy. Next, he'll offer a payment plan and this closes more people. They've still paid too much, but they are unaware of the fair price for a warranty and just want to pay for it in installments rather than all at once.

If the salesman can't get the sale, guess what? Now a more experienced salesman gets on the phone for the hard selling. First, they try to put the first price offered on a better payment plan and if that doesn't work, they start reducing the price in an attempt to close the sale. But, this second salesman can only go so low because a commission has to be paid to both he and the first salesman.

What happens if this more experienced salesman can't get the sale? He tells you there might be one last option and sends you to another salesman who offers some serious price reductions and even more attractive payment plans. This last salesman makes less money because he has an easier job, after all, he's now offering the used car warranty at a fair price.

This company runs this pricing scheme to make a lot of money. Think about it. They get a certain number of callers at the first price offered. Cha-Ching. Some take the first price offered on the first payment plan offered . Cha-Ching. Next, the manager lowers the price. Cha-Ching. If you're still not buying, the manager sweetens the payment plan. Cha-Ching. And after all this, for those who still haven't purchased, they send you to the discount department and do whatever it takes to get the sale and they still make money. Cha-Ching.

I must tell you that this is one of the most elaborate pricing schemes I've heard of and it seems to be spreading to other brokers who see how profitable this is. So, beware, if you call a company and start getting the run-around, you'll know what's going on and you'll run as fast as you can. By the way, you can avoid all this non-sense by buying through a direct seller and avoiding brokers all together.


For twenty-five years, Tom Andrews sold auto warranties and insurance policies direct to consumers. He knows the difficulties faced by consumers when buying auto warranties and the scams that are waiting for them. Retired, he now writes to inform consumers on how to get their monies' worth and avoid scams. For more information on how to buy auto warranties, go to: http://www.auto-warranty-spy.com



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