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Auto Dealer Extended Warranty Claims

Most automobile dealers attempt to sell buyers what are called "extended warranties" on new and used vehicles.  Most often, these are not warranties at all, but rather what are known as "service contracts."  Most often they are issued by third party shell companies, wholly owned by insurance companies.  This type of service contract has no relationship to the auto manufacturers. 

What purchasers are not told is that the service contract companies return all or part of the premium to the selling dealer, typically some at the front and the remainder at the end of the policy term.  If claims are paid during the policy term, the dealer gets less returned on the back end.  Often the dealer is left with the discretion of approving or denying claims.  Which means that when the claim is submitted, the dealer has every financial incentive to deny all claims.  Unfortunately, that frequently occurs.  Typically, the claim will be denied on a frivolous basis, such as the buyer's inability to prove that the oil was changed every 3,000 miles, when dirty oil had nothing whatsoever to do with the breakdown. 

It is so expensive to retain a lawyer to pursue such a claim that most purchasers simply pay for the repair and let the claim go.  However, the dealer can be pursued under the Texas Deceptive Trade Practices-Consumer Protection Act (DTPA).  The DTPA allows a consumer who is harmed by a deceptive trade practice like this to recover up to treble damages and attorneys' fees.  Over the past 23 years, Tim Riley has handled many of these auto dealer extended warranty claims.

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