Extended auto-service contracts probably aren’t worth the money, according to a story in the December issue of Car and Driver.

The magazine conducted a secret-shopper sting on St. Charles County’s three biggest brokers of so-called extended warranties: Wentzille-based US Fidelis; St. Peters-based National Dealers Warranty, which does business as StopRepairBills.com; and St. Charles-based Mogi.

Outside of car dealerships, those firms and the 30 or so other service-contract brokers based in the St. Louis area are believed to sell most of the nation’s aftermarket vehicle protection plans. (You can learn more about those companies by visiting the Post-Dispatch’s online map of area service-contract brokers. Click on a company for more information, including archived stories and blog posts.)

The Car and Driver story — written by Steven Cole Smith, automotive editor of the Orlando Sentinel –  relies heavily on the St. Louis Better Business Bureau, which has waged a national crusade against service-contract brokers based here. Loyal Post-Dispatch readers won’t learn much new from the article, but a secret-shopper sidebar makes for interesting reading.

Smith called the three companies pretending to be a consumer interested in buying a service contract for 2002 Ford F-150 pickup with about 22,000 miles. Here’s what the companies told the secret shopper:

• Mogi tried to sell Smith a $2,650 service contract, but wouldn’t tell the undercover reporter how long the coverage lasts. Smith wrote the plan “requires a waiting period of 30 days and 1000 miles - not either/or but both - before I can file a claim.”
• In a pitch for a $2,449 service contract, a US Fidelis salesman may have used two deceptive sales tactics on Smith that former employees say are common.  They’ve told the Post-Dispatch that they were instructed to put consumers on hold under the pretense of getting approval from a sales manager, even though no such conversation takes place, and to warn consumers that a quoted price is good for one day only, even if that’s not the case.
• After warning Smith that the mileage on the truck is alarmingly low, a National Dealers Warranty salesman tried to push Smith into buying a non-refundable protection plan tied to the purchase of a vehicle additive. In an Aug. 30 Post-Dispatch story about these plans, Michael Carter, NDW’s general counsel and spokesman, defended additive-based protection plans as ideal for high-mileage vehicles.

Reprinted here, with the magazine’s permission, is the sidebar from Car and Driver, December 2009:

WHAT HAPPENED WHEN WE CALLED

We contacted Mogi, US Fidelis, and StopRepairBills.com to inquire about a service policy on a 2002 Ford F-150 pickup truck with about 22,000 miles on the odo. (The truck exists.)

MOGI: Liz answers and takes some information - including a “phone number in case we get cut off”- and after four minutes, we do get cut off. Eighty minutes later, a Mogi salesman named Paul calls and says that when Liz tried to transfer my call, they were too busy to take it. He says the truck qualifies for a “Silver policy,” but he never reveals the length of it. Whatever it is, he says the policy is $2650, has a $100 deductible, and requires a waiting period of 30 days and 1000 miles - not either/or but both - before I can file a claim. Paul gives up when I insist I need to sleep on it.

US FIDELIS: Ricky answers, says the call may be recorded, takes down info, then recommends a four-year, 125,000-mile policy for $3049. I tell him I want to think about it overnight, but he pushes for me to sign up now. He says NASCAR great Rust Wallace is a spokesman, and that “he would not put his name on a product that wasn’t legit.” After eight minutes of selling, he puts me on hold. Two minutes later, Ricky is back, and even though the truck is “extremely high risk,” his manager has approved a $600 price cut, to $2449. If I wait until tomorrow, “all discounts will be null and void,” Ricky warns, and I will have to get a notarized statement on the odometer reading and have a Ford dealer perform a diagnostic check on the truck, both of which will be waived if I sign up today, but only today. After 14 minutes in all, Ricky gives up.

STOPREPAIRBILLS.COM: Joe answers, takes down the VIN of the truck, and asks me how many miles are on it. He is distressed to learn it has 22,000 or so. His grave concern is that low-mileage vehicles that are not driven much can develop “rust” and other problems that make them “absolutely” less reliable than higher-mileage vehicles. After three minutes, I’m on hold while he consults a manager to see if the truck even qualifies for a policy, due to the low mileage. A minute later, I’m offered a policy called “The Choice,” for five years and 100,000 miles. The down payment is $295, and payments are $44 a month for 18 months, for a total of $1087. Joe is upset when he hears I want to think it over because he is worried the truck will break down and I will have to pay for a new engine ($3500, he says), transmission ($2500), or water pump ($800 to $1000). He lowers the price to $195 down and $39 a month, then gives up after a pitch that lasts 13 minutes.

If you click on “The Choice” on StopRepairBills.com, you get a website for The Choice (the-choice.net). The site appears to be a combination of service-contract information and an ad for an additive called The Choice, which claims to make your engine run 10-to-15 degrees cooler if you pour it into your radiator overflow reservoir.

According to an article in the St. Louis Post-Dispatch, this “additive” warranty is one of the more controversial sales methods the service-contract companies use: You are not buying a service policy, you are buying an additive that comes with a warranty that covers everything the typical service contract does. The advantage to the company? “First,” the story says, “the consumer is buying a product, not a contract. Second, the consumer is entitled to a refund if the service contract is cancelled early. That’s not the case with a product warranty.” Joe, the StopRepairBills.com salesman, did not mention this distinction. One source told the newspaper that this sort of product was developed to avoid California regulations that allowed only auto dealers to sell service contracts. “It’s our most popular product in California,” spokesman Carter says.