Magic Auto Additive Makes Your Service Contract Refund Disappear

Auto service companies in St. Louis have found a way to avoid issuing refunds when customers cancel vehicle-protection contracts: by selling warranted vehicle additives in place of service contracts.

The new deals resemble service contracts – indeed, many consumers don’t seem to notice the difference. But unlike service contracts, the additive offers don’t allow customers to cancel and get a refund.

According to a report in the St. Louis Post-Dispatch, companies such as US Fidelis and National Dealers Warranty are using the additive plans to avoid state laws requiring that refunds be issued to vehicle-service consumers for coverage they don’t use.

Here’s how the product warranties work: Consumers are sold an automotive additive – a bottle of liquid, or some tablets. Companies selling the additive say that if the product fails to prevent a breakdown, the warranty on the additive will cover repair bills – or at least some portion of them.

With traditional auto service contracts, the consumer is purchasing a promise that the seller will cover repair bills. The difference? First, with the additive, the consumer is buying a product, not a contract. Second, the consumer is entitled to a refund if a service contract is canceled early. That’s not the case with a product warranty.

So if you buy one of the additive warranties from one of the vendors and need to cancel for whatever reason (move out of state? find a better mechanic?), you’re out roughly $2,000.

Ten St. Louis area companies are named in a Better Business Bureau complaint about the matter, and many of them do business across the country, “including US Fidelis; National Dealers Warranty; Dealers Warranty, of St. Charles, which does business as Mogi; Carhill Enterprises, of St. Louis, which does business as Consumer Protection Services; and TXEN Partners, of St. Louis, which does business as Protection Direct.”

Regardless of what state you live in, consumers should read the fine print before buying any new vehicle-service product.

Would you pay $2,000 for this additive? [St. Louis Post-Dispatch]

(Photo: Consumerist)