Warranty Scam When Buying A Car

Written by Bryan Daly
Fact-checked by Caitlin Wood

Warranty Scam When Buying A Car

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Auto Car Warranty Lookout

Buying a new car can be awesome but there are many different factors and expenses to consider beforehand, like features and add-ons. Do you want tinted windows? What about the latest safety and anti-theft technology? Some cars come fully loaded, others require you to pay for upgrades. 

You may also want an extended warranty, which many dealers offer. The problem is, salespeople can be tricky and good at misleading customers into warranties that aren’t the right fit for them.

Learn how to negotiate the price of a new car.

Types Of Warranties

Dealerships offer different warranties for different vehicles. Cheaper warranties usually cover basic issues for several months. However, if you don’t mind paying more, you can buy a warranty that lasts for years and covers a whole range of issues.  

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Common types of car warranties include:

• Manufacturer’s Warranty – Many cars have a manufacturer’s warranty included with the price, which covers factory defects and simple mechanical problems for a limited period (some brands offer longer warranties than others).  
• Extended Warranty – Also called service or maintenance agreements, extended warranties typically cost extra but cover different parts of your car, such as its engine or transmission, for longer than a manufacturer’s warranty. 
• Implied Warranty – Some dealers sell vehicles “as is”, meaning you’re buying the car at your own risk and any necessary repairs or services aren’t covered. Luckily, there are provincial and territorial laws that can protect you against defective products. If you buy a lemon car, you might be able to sue the dealer. 

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Warranty Scams When Buying A Car

Not all warranties are blatant scams. Many can protect you when your car experiences various problems. That said, some dealers pull sneaky tricks to manipulate you into paying more than you should for a useless warranty that may as well be a scam. 

Here’s what you should know about car warranties in Canada: 

• Beware The Fine Print – Always do research before buying a vehicle. That includes reading every part of your contract and finding out where the warranty comes from. Many dealers hire third-party companies who offer warranty packages that don’t fully cover mechanical or electrical issues.
• “Extended Warranty” Is Actually Misleading – A warranty is a manufacturer’s guarantee that they will repair or replace a defective product within a specific time (included with the car’s price). An extended warranty is a “service contract” that’s sold separately for an extra cost and only protects you for a longer period.
• Warranties Don’t Cover Misuse – Most warranties won’t cover your vehicle if you’re responsible for the problems it’s having. So, if you’ve driven the car too hard, left it sitting too long or don’t bring it for regular inspections and servicing, many warranty providers will deny your claim. 
• Warranties Don’t Cover The Damage From Non-Factory Replacements – If you modify your vehicle and try to claim the resulting damage, you won’t be covered under warranty. The same goes for any repairs that you do yourself. For instance, if you add the wrong type of fluid and ruin your transmission, you’ll probably be out of luck for the $3,000 replacement that you need afterward. 

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Things To Ask When Purchasing A Car

Before you buy any vehicle, here are some important questions to ask the dealer:

• Is the warranty included in the price or does it cost extra?
• How long is the coverage period?
• What mechanical, electrical, and bodywork issues does it cover?
• Does the warranty cover replacement parts and servicing fees?
• Where can I go to get warranty-covered repairs?
• What conditions does the warranty feature?
• Can I cancel the warranty? If so, how much will that cost?  
• Will the dealer make the repairs or do I have to bring the car elsewhere?
• Who has to finance towing fees if my car breaks down?

Find more questions you should ask your dealership before buying a car.

How To Spot A Warranty Scam

Thankfully, there are ways to spot and protect yourself against warranty scams:

• Find out if the dealer is certified and has a good reputation
• Research your vehicle brand and see if it comes with a factory warranty
• Ask for a price quote with and without the warranty (if it costs extra)
• Avoid phone, email, software and online offers from suspicious senders
• Contact the Canadian Anti-Fraud Centre if you’re a victim of a scam 

Watch Out For Warranty Scams!

Buying a car can be expensive and annoying, especially if you purchase a warranty that’s not worthwhile. Don’t worry, you can easily avoid a warranty scam if you’re careful and know where to look. For more information about warranty scams and how to protect yourself against them, contact the Canadian Anti-Fraud Centre.