COLUMBIA, S.C. — Thousands of complaints are pouring in across the country regarding vehicle service contracts, also known as extended warranties. Many customers are not getting the coverage they thought they signed up for, because they didn't read the fine print.
Paying for major car repairs can get expensive quickly. That’s why many car owners turn to these vehicle service contract companies. With the contracts, customers pay a set monthly cost so if repairs are needed in the future, ideally, the company will cover it.
However, many consumers have complained that when the time comes to get work done, they're still stuck with the bill.
Columbia resident, 77-year-old Richard Bailey, reached out to News19 for help when he ran into a snag with his vehicle service contract with the company CarShield.
CarShield markets itself as high-level car protection for a low month-to-month cost. Bailey joined CarShield last September and pays $99 a month, so if his car needs major repairs, they’ll cover it.
Bailey took his used Saturn into a local auto shop in December, where the mechanic told him he may have engine problems. To take apart and look at the engine, it'd cost Bailey $1,500 for a diagnostic fee. Bailey assumed CarShield would pay for it, but his policy doesn't include diagnostic fees.
“This is what I should’ve read," Bailey said while pointing at his CarShield contract booklet. Bailey signed up with the vehicle service contract company after seeing their commercials on TV, but admits he never read the contract.
“People that supposedly had CarShield are saying how they fixed their engine and transmission for free, so I said, ‘wow this is something for me’,” Bailey recalled from the advertisement.
CarShield’s contract has a list of exclusions, like diagnostic fees for example. However, Bailey felt misled by the representative that signed him up for the service over the phone without mentioning the exclusions.
After he couldn’t get the diagnostic fee covered, Bailey didn’t get his engine looked at and was frustrated. “I said, 'I don't have $1,500!' That's why I have CarShield, but CarShield says no, in order for them to pay anything, they got to see if there's something wrong with the engine.”
News19 reached out to CarShield regarding Mr. Bailey’s situation. The company agreed to pay for his diagnostic fee, and put over $4,000 toward his engine replacement so he could get his car fixed.
However, after Bailey got his car back from the shop, he told News19 he's still not happy. “The thing is, it’s a used engine and it may have a seal problem, and if it has a seal problem, I’d have to pay $1,500 to have it done, so I’m still at a loss,” said Bailey. He added that his replacement engine is working fine without the seal for now, and hopes he won’t have to get any more work done.
Bailey's situation is similar to thousands of others that have signed up for an extended warranty. CarShield, for example, has over 2,500 complaints across the country filed with the Better Business Bureau in the past three years. The company is based in Saint Louis, so all issues go to the BBB located there.
“We saw in a three-year period between 2018 and 2020, that the number of complaints we received at the Better Business Bureau here in St. Louis about vehicle service contract companies had nearly tripled,” explained Chris Thetford with the BBB.
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Thetford said most complaints they see about CarShield are consumers feeling misled by their advertising. “A consumer has spent money on a contract, is left with a car that needs repairs, and still then has to pay for the repairs,” said Thetford.
Contracts like Mr. Bailey’s won’t cover costs of repairs for several reasons, including if damage came from external causes, or if a customer continues to drive their car after the issue began.
While all conditions and exclusions are listed out in the contract book, many times customers don’t take the time to thoroughly read it. Bailey admitted, "it was my fault for not really reading the book.”
CarShield told News19 they give customers a 30-day period to read the contract so they know what’s included before continuing payments.
As for the company's "F" rating with the Better Business Bureau, CarShield is suing the organization. The lawsuit claims the BBB is misrepresenting the company and ignores their efforts to address concerns. The BBB denies these claims.
If a consumer is considering signing up for a vehicle service contract, Thetford suggests thoroughly reading the contract beforehand. He also said to weigh the option of starting a rainy day fund for repairs instead.
“Another good tip is to think about taking that contract to the person who currently repairs your car and saying first of all, ‘if I were to purchase this, would your shop honor this contract? And secondly, what kind of experience have you had when repairing cars that have had these contracts?’,” suggested Thetford.
Bailey hopes his experience will serve as a warning to others to be extra cautious and thoroughly read the vehicle service contract before signing up. He plans to cancel his membership.
If a consumer is looking for help with an issue regarding vehicle service contracts, they can reach out to the Better Business Bureau or the Federal Trade Commission.