Car Repair Scams: Why Traditional Scam Prevention Tips Will Cost You A Fortune

The advice is all the same for auto repair scam prevention. You’ll be told to find an ASE certified shop. Ask around. Check out several different repair facilities first. Are they clean and neat? Do they provide written estimates? Check with the BBB. Is it AAA certified? Some will even advise to “ask for the parts back.”

Traditional tips and suggestions merely put a band-aid over an infected, gaping sore. Strong antibiotics are required to address the root source of the problems in the repair industry. To provide repair customers with the above advice is like sending a soldier into combat dressed in a pink tutu. We have to stop scratching at the surface.

There has not been any “new” advice in decades. More importantly, no one has answered why car repair scams have reached an estimated 40 billion dollars per year. Moreover, why is there still no solution to stop car repair scams?

The first hurdle to conquer is the perception of the frequency of auto repair scams. Many folks just don’t believe that car repair fraud is all that bad. Some even argue that the vast majority of repair shops do an honest day’s work, and that a few bad apples are making the rest look like crooks.

This is an interesting argument, and raises a number of questions.

  • If it is only a few “bad apples,” where are they hiding the 40 billion?
  • If most repair shops are honest, why does every state warn against car repair scams?
  • Why are auto repair shops at the top of consumer complaint lists every single year, in every state?
  • Why are repair scams spreading across the continents? For example, just last week Australia listed car repair scams at number 4 on their top 10 consumer complaint list.

The perception of frequency gets distorted because there are a number of levels to repair scams. There are the blatant rip-offs covered in the news. Then there are the common scams such as exorbitant prices and estimates, and aggressive scare tactics to get service customers to perform services. These occur every day.

The repair scams uncovered by RepairTrust not only found the tactics listed above and more, but a powerful undercurrent of scamming at the foundation of the automotive service industry. In reality, most car repair scams go unnoticed by the service consumer. Service customers just have no idea that they were ripped-off. This under-the-radar scamming occurs in dealerships, local shops, and franchises. Affiliation with ASE, AAA, BBB, NADA makes no difference.

An ASE patch on a technician’s arm, or an AAA or BBB sticker on the door of a service center means absolutely nothing in terms of a scam-free facility. Word of mouth recommendations can be just as devastating, as even shops that “seem” honest aren’t. Check out Car Repair Prices: There Are No Honest Mechanics @ EzineArticles or RepairTrust for further discussion on this. Also, for NEW and FREE scam prevention tips visit the Car Repair Scam Articles @ RepairTrust.

Traditional tips are ineffective in today’s service industry. Service facilities have found new and ingenious ways of ripping people off. In truth, many of the old tips and suggestions have actually become weapons allowing service centers to indulge in car repair scams more than ever.

The car repair playing field must be leveled. Service customers need solid answers, and they need to be equipped with information, understanding, tools, and an insider’s view of the who, what, when, where, why, and how of price-gouging. Navigating the dim underworld of today’s service centers with outdated information will cost a fortune.

For a great video visit “Repair Scams Caught on Video” @ http://www.repairtrust.com

Car Repair Prices: Should I Go to the Dealer or My Local Guy?

There is lots of advice on where to service one’s vehicle. Many argue that local shops are best, and that you only need to go to the dealer for warranty work and recalls. Others state that dealers are the real experts even though they’re expensive. These arguments are interesting, but do little to clarify the myths and facts of dealership service versus local shop service.

The two primary objectives of these arguments are money and quality. These two interweaving points need to be fleshed out when determining the appropriate facility in which to service a particular vehicle.

In terms of money, all car repair is expensive. Whether at a dealership or local shop, studies show that car repair prices are extreme. Consumers are scammed tens of billions of dollars every year. Every type of service facility: dealerships, local shops, and franchises, are ripping you off in one form or another. Stating that one facility is more expensive fails to recognize that 98% of ALL repair shops are ripping people off.

Moreover, the expense argument of car repair doesn’t take into account the quality of service for the money. The quality of service between a dealership and local shop is a key factor to consider.

There are vast differences in the quality of car repairs. There are many variables, from the customer service received, the diagnosis of the problem, the quality of parts used, to the technician performing the actual repair.

In short, you could have a water pump replaced perfectly, and at a great price, at a dealership. You could have the same job butchered at a local shop. You could easily switch these scenarios, and add ten more variables.

The concern over the quality of repairs is heightened by the fact that the majority of technicians lack the appropriate training, which can also increase the price. Furthermore, depending on the facility, the technician will be limited by the facility’s resources–equipment and expertise, as well as by the service center’s internal policies and practices.

For example, at a dealer, a technician can only use factory parts (parts built by the manufacturer). In most cases, this is great. Factory parts are perfectly designed for the vehicle. However, a twelve-year-old car doesn’t necessarily need a factory part. While it can’t hurt, the age of the car may not justify the expenditure, if the repair can been done for significantly less elsewhere. The technician may know this, and have a great alternative solution “outside company policies.” It’s unlikely, however, that he’ll speak up, or that he’ll even be allowed to speak up.

In cases like these, the customer suffers, having to pay significantly more than necessary. Dealership by-the-book protocols often dictate replacement of expensive parts, and thus dealer personnel will not and/or cannot offer alternatives. Following these mandates isn’t necessarily bad, and this example is not intended to frame dealerships in a negative light. However, repairs in a dealership environment very often exceed the value of the vehicle being repaired.

The point here is to illustrate that depending on the year, condition, and value of one’s vehicle, a dealership “may” not be the best alternative. However, this is rapidly changing. Technological advancements require dealer service more and more for computer updates, software updates, intricate electronic coding, and a host of mechanical concerns outside the scope of the local garage.

Unfortunately, a local shop may not be a good alternative either. At a local shop, a technician has a whole range of parts from which to choose. However, this presents problems. First, most local shops will use local parts suppliers regardless of quality because of speed, convenience, and business relationships. This means that you may get a better price (refer to Car Repair Prices: Who Charges More, Dealerships or Locals @ http://www.repairtrust.com/articles.html for an in-depth discussion on car repair prices). However, the use of many aftermarket parts (parts not built by the manufacturer) can cause numerous problems, and may even cause other systems to fail. This is common–and, you pay for it!

Local shop technicians–the good ones anyway–know the difference between quality parts and cheap parts. However, as mentioned above, the good ones are rare. In light of this, many local shops are turning to the use of factory parts because it’s just less headache. There’s nothing more frustrating than installing an aftermarket component that has to be bent, twisted, tweaked, and manipulated to fit correctly or work properly. Not only is the part made poorly, it’s been modified before it’s even installed. Comforting, isn’t it?

Car repair concerns are not limited to parts. The quality of the worked performed–diagnosis, labor, experience, and installation procedures–is a critical factor. In this arena a dealership technician and a local shop technician are often worlds apart.

A dealer technician has all available information and proper equipment at hand, although he may lack the training to know what to do with it. Nevertheless, he does have a team of co-workers to turn to, and he can draw from their experience. Dealer technicians also see your car and its types of problems daily, and what might be a complicated repair for a local shop is quite easy for a dealer.

However, the structure and flat-rate environment of dealerships very often cause even experienced technicians to overlook even simple problems. This is exacerbated by the lack of effective of communication of an inexperienced or overwhelmed service advisor who is supposed to be advocating on your behalf. While there are numerous other obstacles, the point is that dealers are in the dark ages in terms of consistent quality service.

Before discussing what’s better, a dealership or local shop, a final point to consider is the condition of your vehicle after several years. What facility keeps your vehicle in “better” condition: a dealership or local shop? And, does this “better” condition translate into dollars?

Given the current state of the service industry, it would be an aberration to receive consistent, quality service anywhere. Nevertheless, both local shops and dealerships are a vital component of the automotive service community. The consistent use of inferior parts and poor workmanship continues to be the local shop’s downfall. Vehicles need to be maintained according to manufacturer specifications. There’s no argument on this. Although dealers still struggle with good customer service and consistent positive results, a well-maintained vehicle from a state-of-the-art dealership results in a significantly better quality vehicle, long term. A better quality vehicle increases its value.

Auto Repair Insurance: Extended Warranties-Myths and Facts

How much insurance does one need? You have the big four: home, health, life, and car insurance. Then there’s a second category, which starts getting a little hazy with credit card insurance, purchase protection plans, fraud insurance and more. Extended warranties, also called extended service contracts, or extended service policies fall into the mist of this second category.

Extended warranties are supposed to pay (in full or in part) for specified repairs for a specific period of time after the expiration of the factory warranty. They can be a great value. They can also be a significant waste of money. It gets quite foggy in the details. What exactly is covered? How long? How much? Are there hidden charges?

There are numerous extended warranty companies and an even wider variety of warranty packages available: silver, gold, platinum, platinum-plus, and a host of other confidence-building words. What’s the best plan, and are extended service contracts worth the money?

Extended warranties, like life insurance policies, are a numbers game. They’re a gamble. You pay $2500-$4500 for a 2 year, 100,000-mile protection plan and hope that you get at least that back in warranty repairs. The provider on the other hand, hopes to pay out less than it insured.

There are three major types of plan providers: The manufacturer, the dealership/third party, and third party providers. Each one has its assets and liabilities (discussed ahead).

What exactly is covered in an extended service plan? As mentioned above, what’s covered depends on the package purchased. Some plans only cover the power train: the mechanical components of the engine, transmission, and rear-end. Others cover the power train plus some electrical components. Still others cover electrical, advanced electrical, and computer components. Some only cover what’s listed in the contract. This is called a “Stated” or “Named” contract. This means that if it’s not stated, it’s not covered. Some cover bumper-to-bumper, similar to a manufacturer warranty, except trim pieces, upholstery, exterior components, cosmetic items, and a number of other exclusions.

Never before has the adage, “The devil’s in the details,” been so applicable.

Manufacturer Extended Plans: Extended service plans from the manufacturer are the best in terms of coverage, convenience, and quality. Coverage is similar to the warranty while the vehicle was under its original factory warranty–with similar exclusions stated above. The billing is direct, meaning you don’t have to pay out-of-pocket, except for a deductible, if applicable. Quality is great too, as an extended warranty from the manufacturer will only use factory parts. They also have money, so there’s less risk of bankruptcy.

The down side of manufacturer extended service plans is that they are not cheap. These plans are generally the most expensive, require low mileage standards, and necessitate servicing your vehicle at a dealer for coverage.

Dealership/Third Party Plans: Extended warranties from a dealership are actually from a third party insurer. These providers are generally reputable, but not always. However, if there is an issue (such as the warranty provider filing chapter 11, which is quite frequent in the extended service contract business), the dealer may step in to cover any repairs that would have been covered under the defunct plan. Also, claims are easier: billing is direct because the dealership has a working relationship with the provider, and there is usually agreement on price.

Some dealers set up their own “internal extended warranty,” which is honored by the selling dealer. This is rare, and should not be confused with a manufacturer warranty.

Important: extended warranties are often passed off as “manufacturer” warranties. They’re not. This is a sales trick. Also be aware that there is a significant mark up, as the dealership is merely acting as the middle man. Lastly, extended warranty companies often go bankrupt without warning.

Third Party Plans: These plans are called third party plans because they are outside the responsibility of the manufacturer and the service center performing the repairs (unless there’s a working relationship with a repair shop as stated above).

There are hundreds of extended service contract companies. Some have good reputations, some don’t. Third party plans are frequently sold by used car dealers. You may also receive an official looking notification in the mail stating that your warranty is expiring, and directing you to call an 800 number ASAP. This is a marketing tactic by an independent warranty provider. Despite the “official” appearance of the postcard or envelope, it’s not from the manufacturer. Manufacturers do not send out reminders about warranty expiration.

Given the wide-variety of third party plans there are numerous red flags.

1) Claims: Extended warranty companies will be quick to tell you that filing claims is easy, and that the service center gets paid immediately via a credit card. Thus, there’s no out-of-pocket expense for you. However, the warranty company can’t dictate a service center’s policies. Some service centers will only accept payment from the repair customer. Thus the burden is on the repair customer to fill out the forms, contact their warranty company, and await reimbursement via check, which can take 2-8 weeks.

It is the service center’s responsibility to contact the extended warranty company to let them know what’s wrong with the vehicle and to check coverage. This process can take anywhere from 20 minutes to 20 days, sometimes more, depending on the degree of repairs and especially the amount. (See $1000 and Adjusters ahead)

Service centers and extended warranty companies frequently battle over the “fair” price of repairs. Many repair shops no longer negotiate, and just state the price, leaving the contract holder (i.e., the service customer) responsible for the difference.

2) Rentals: Rental coverage is a great benefit. However, there are fixed rates and time limits. In other words, the warranty company is not going to pay to have you drive a Mercedes-Benz, even if you drive a Benz. Rental allowances range from $25 to $35 per day. Also, rental coverage is based on the number of hours it takes to repair the vehicle, NOT the number of days your car has been at the shop.

3) $1000 and Adjusters: Repairs that approach $1000, or that require a significant amount of work, will be cause for the warranty company to call in an adjuster to confirm the diagnosis. This will delay the repairs by a minimum of 24-48 hours. It may cost you additional money when an adjuster is involved. You may be charged to have your vehicle pulled back into the shop for inspection, as well as for the time spent with the adjuster.

4) Tear-down Charges: In many cases, an extended warranty company will require that a particular component be taken apart for inspection to determine if the repair is indeed needed and covered. This puts the service customer in a very awkward position. The customer will have to authorize potentially hundreds of dollars of tear-down expense in the hopes that the repair is covered. If it’s not, the customer is out the hundreds in tear-down PLUS the actual repair. This does happen!

Common Myths About Extended Service Plans:

Extended warranties cover maintenance services and brake work.

No. Extended warranty plans do not cover maintenance or wearable items. Brake pads and rotors are wearable parts. Maintenance such as coolant, brake and transmission flushes, tune-ups, services, oil changes, bulbs, wipers, and more are not covered.

They told me it’s bumper-to-bumper, so it covers everything, right?

Wrong. Not even a factory warranty covers everything. When pitching the sale for the extended warranty, one is very often lead to believe that he or she will have nothing to worry about. This is just not true on so many levels. For example, if your bumper falls off it’s not covered.

I don’t have to pay anything, right?

Wrong. Despite the claims of 100% coverage, there are many factors involved. The labor rates, labor hours, diagnostic times, parts prices, and machine work are just a few items that often conflict with a service center’s policies. Some extended contracts only pay a maximum of $55 per hour, and only allow one half hour for diagnostic time. This is generally unacceptable to the service center, as labor rates have skyrocketed to over $100 per hour at many dealerships, and average $75 at local shops. Moreover, with the complexity of today’s vehicles, diagnostic time is at a premium. The customer pays the difference.

If I have an expensive problem, I can just purchase an extended service contract.

It’s unethical, but it’s an option many attempt. However, most service contracts have a minimum time requirement before the first claim can be filed: usually three months. Also, many contracts require that your vehicle be inspected by a service center to check for pre-existing conditions–just like life insurance.

My contract lasts up to 100,000 miles.

Only if the time limit doesn’t run out first. All extended warranty plans have a time limit. For example, a typical contract will state that the vehicle is covered for two years or 100,000 miles, which ever comes first. During the sales pitch, however, the emphasis will be on the 100,000 miles, not the time.

If my car breaks, it gets fixed like new.

Actually, depending on the contract, an extended warranty company can insist on installing remanufactured or even used parts.

Items commonly not covered by extended warranties:

  • Any component with a pre-existing condition
  • Any component related to a Technical Service Bulletin (TSB)
  • Many components that has been updated by the manufacturer
  • Extra components necessary “due to manufacturer updates” to complete the repair
  • Trim pieces: molding, cup holders, dashboard, console, body parts, glass
  • Many accessories: radios, DVD players, TVs
  • Many expensive electronics: climate control units, navigation assemblies

Extended service contract positives: Some service contracts are transferable, and may thus increase the resale value of a vehicle. Many come with trip interruption reimbursement, towing and 24-hour road side. Some plans can also be financed, or have E-Z Pay Plans. Others offer a money-back guarantee.

What should you do? You’ll get lots of advice about doing the research, comparing plans, and reading the fine print. This is all sound advice. But what about doing the math?

Let’s say a plan costs $2500 for 2 years or 100,000 miles, whichever comes first. To break even you’ll need a minimum of $1250 per year in covered repairs, excluding regular maintenance. Remember covered is the vital word here.

Another way to break it down is to anticipate having to pay $104.17 per month over the next two years in “covered” repairs. Do you want to take that bet?

What could happen? You could double your money or more in repair work. You could conceivably get a new engine and transmission (or used ones anyway). You could also easily spend $2500 for a service contract, and still have to pay another $2500 for repairs, which for a variety of reasons, were not covered under your plan. Now you’re out $5000.

Alternatively, you could keep the initial $2500. In many ways all an extended warranty does is prepay for repairs. You could stick the money in the bank and collect interest. Then you could withdraw the money for repairs as needed.

Another consideration that’s rarely discussed is the cause of the problems. Many car repairs problems are the result of wear and tear, neglected maintenance, physical damage, or acts of God–such as flood damage. None of this is covered. The gamble only covers failed components.

If the vehicle you’re driving does cost $2500 to $4500 in repairs due to outright failed components, is it a vehicle you even want to consider keeping? A vehicle that needs this kind of repair work due to mechanical, electrical, or computer failures may not be worth it. The $2500-$4500 would be better spent on an upgrade to a quality vehicle rather than insuring a lemon.

There’s no question that auto repair is expensive, and even quality cars break from time to time. But do they breakdown to the tune of $2500-$4500? That’s a hefty bet on a “possibility.”

Terence O’Hara from the Washington Post makes an excellent assessment about extended warranties in general. He writes:

…extended warranties play upon a basic human trait to avoid loss, even if it means sacrificing a possible future gain…the gain is all the other things of value that a consumer could buy with the money that was spent on a warranty

What’s the best plan? Money in your bank account!