Car owners shouldn't waste money on extended service warranties for used vehicles, attorney says | Call Kurtis
When you purchase a car, it's often that an extended warranty will be offered. However, when a Lodi woman went to use the protection plan she purchased, she was told the company was out of business.
Mary Woods then called CBS13 and the Call Kurtis consumer investigative team to look into it.
These extended vehicle warranties usually cost several thousand dollars and are supposed to give you peace of mind should something go wrong with your car.
Through the years, we've done stories on other car warranty companies vanishing, too.
Should you purchase one?
Woods, 72, told us the transmission on her 2016 Acura MDX started acting up.
"And, so I thought, great, now what?" she said.
The widow remembered that she paid for a five-year road plan, which would cover half of any repair up to $2,000 per year. But, Woods learned that Matrix, the company she paid $2,592 for this protection, went bankrupt last summer.
"Whoa," she said. "That was the last thing I wanted to hear. I was so mad."
Throughout the years, the Call Kurtis consumer investigative team has reported on similar companies vanishing. The company that Tracy's Darrell Hare paid $85 per month for coverage also closed, without him even having used the benefit.
"I would have been better putting it in the bank waiting for the car to break down," Hare said.
So, are these extended warranty contracts worth it?
"I say absolutely not," said Elliot Conn, a San Francisco attorney. "Give a firm, hard 'no thank you' and move on."
Conn explained that these deals turn huge profits, but are often limited in what they actually cover for vehicle owners. He added that there is no guarantee the company will be around when you need it.
If it's so lucrative, how are these companies going out of business?
"Eventually, it catches up to them," Conn said.
Conn thinks consumers are better off paying a few hundred dollars before purchasing a vehicle and to have a trusted mechanic inspect it, saving the rest of that money in the event you do need a repair someday. Conn added that those repairs are usually far less than a policy that could cost thousands of dollars.
"I thought, my God, at my age, I should have known better," Woods said. "I felt hurt and vulnerable. I felt very vulnerable. I thought, 'You used me. You took my money. You used me'".
Woods said that's because she received absolutely nothing for that extended coverage – for the more than $2,500 she paid for peace of mind.
"C'mon, don't do this to people," she said. "It's just not right. It's just plain not right. I don't know how you can live with yourself when you use people and don't at least offer them some kind of a backup, something alternative, but to make no offers at all and just leave us in the dust, as they ride away. It's just wrong."
In the Chapter 7 filing for Matrix Warranty Solutions, the company listed that they owed $57 million, but only had $6 million in assets.
That means anyone owed money will most likely get pennies on the dollar.
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