The extended auto warranty company uses direct mail. Those receiving the letter call a toll free number and a salesman answers. Nothing wrong so far! The salesman will ask you a few questions and then tell you that he needs to transfer you to a manager to see if your vehicle qualifies for coverage. Hmmm? There's no reason to transfer you to another person. The same person can find out how old your vehicle is and how many miles it has to determine if it qualifies for a car warranty. However, this manager will ask more questions before saying he's made an exception for you. But, you have to buy on this phone call since he's made an exception. Yeah, right!



You guessed it, every vehicle qualifies. I'm told they consider this the most important part of the process and the manager can take several minutes to get you prepared for the salesman to take the phone call back. They've gained commitment from you.

When the salesman takes the call back, he has a script to make you a warranty price offer. Some people buy at this point and the salesmen call it a "lay down". The problem is they've paid as much as $800 to $2000 too much.

But, what if the caller declines the warranty offer? Well, the salesman isn't going to give up. First, he will continue trying to get the sale by comparing the cost of the warranty to repair costs. Some more people buy. More people decide to buy when an installment plan is offered to allow payment of the full warranty cost over several months. They've still paid too much, but they are unaware of the fair price for a warranty and just want to pay for it in installments rather than all at once.

If the salesman can't get the sale, guess what? Now a more experienced salesman gets on the phone for the hard selling. In order to get your business, they will try a combination of reducing the price and offering better payment plans. Anything to get the sale. The second salesman who poses as a manager can offer a price discount, but only so much since he and the first salesman need to be paid.

What happens if this more experienced salesman can't get the sale? He tells you there might be one last option and sends you to another salesman who offers some serious price reductions and even more attractive payment plans. This last salesman makes less money because he has an easier job, after all, he's now offering the used car warranty at a fair price.

Brokers who have the nerve to extort the highest price for a car warranty make a lot of money and can live a life of luxury. Think about it. This first price will be accepted by a good number of callers who just aren't familiar with warranty prices or who are in a hurry. Cha-Ching. Some take the first price offered on the first payment plan offered . Cha-Ching. Next, the manager lowers the price. Cha-Ching. If you're still not buying, the manager sweetens the payment plan. Cha-Ching. If you still haven't pulled out your credit card, there's one last attempt to get you to buy. They send you to a lower paid salesman to give you the lowest price. Cha-Ching.

I must tell you that this is one of the most elaborate pricing schemes I've heard of and it seems to be spreading to other brokers who see how profitable this is. So, beware, if you call a company and start getting the run-around, you'll know what's going on and you'll run as fast as you can. Now you understand why I recommend avoiding middlemen like brokers. They just don't add any value and occasionally you run into one that operates a pricing scheme.