BBB: Study shows vehicle service contract complaints are on the rise

Milwaukee, Wis. – The Better Business Bureau (BBB) warns consumers to use caution if purchasing a vehicle service contract and carefully read the contract prior to purchase, as a new BBB study finds that complaints against companies in that industry are on the rise.

The in-depth investigative study – Vehicle Service Contract Industry: BBB Study Reveals How This Complex Business Model Leads to Consumer Complaints When Marketers’ Promises Giveth and Administrators Taketh Away – details the history of the VSC in the St. Louis region, the difference between a VSC and a warranty and the problems consumers report having with the product. Read the full vehicle service contract study here.

Different companies have entered and exited the VSC landscape in the St. Louis region since the early 2000s when the contracts started to become popular. Between 2000 and 2020, BBB of Eastern & Southwest Missouri & Southern Illinois processed more than 15,000 complaints against VSC companies in its service area.

Companies that operate in the St. Louis region primarily market the selling of contracts to millions of consumers. Marketing tactics used by some in the industry have been called into question by consumers, law enforcement, and regulatory agencies. Some companies utilize U.S. mail to send materials to consumers informing them that their manufacturer’s service coverage may be about to expire. Some companies also use electronic media, television, and radio ads that feature influencers who tout the product and its ease of use to promote the service contracts. Some companies have been accused of using robocalls to bombard unsuspecting consumers with offers for their services.

Consumers have told BBB they believe the mailers and commercials are misleading. Vehicle repairs they believed would be covered under policies purchased through the VSC marketing companies are sometimes later denied by policy administrators, which are separate companies. As a result, consumers may spend hundreds or thousands of dollars on repair costs they thought were covered under their policies, in addition to the VSC coverage cost.

In recent years, BBB St. Louis has seen a dramatic increase in complaints filed against VSC companies. From 2018 to 2020, complaints filed against VSC companies located in the St. Louis region nearly tripled, going from 544 in 2018 to 1,402 in 2020.

A Branson, Missouri, man told BBB he needed financial help from his church to have his vehicle repaired after a VSC company denied a claim he made. The man said he purchased the contract after seeing a TV commercial. He said the company denied a claim he made a few months after buying the policy and that he had to pay approximately $4,600 out of pocket to have his transmission fixed. He said he eventually canceled the coverage, but did not receive a refund.

“Never use them,” the man said. “Stay away from them like the plague.”

BBB encourages the industry to be more transparent with its advertising and policies and more active with self-regulatory actions like code of ethics.  BBB also would like to see regulatory agencies be more active in prosecuting bad actors.

Regulators may wish to consider making it mandatory for consumers to be given an opportunity to read and review contracts prior to payments being accepted. This would prohibit the use of a telephone “signature.”

Tips on how to avoid losing money on a vehicle service contract:

  • Do your research. Before paying any money, research the administrator and marketing companies. Check the company’s BBB Business Profile at or call your local BBB.
  • Make sure you need it. Compare the contract with the manufacturer’s warranty. New vehicles come with a manufacturer’s warranty that usually lasts for a minimum of three years or 36,000 miles. A VSC likely won’t provide benefits until a manufacturer’s warranty expires.
  • Do the math. Before deciding whether to invest in a vehicle service contract, figure out how much it is going to cost. If you pay $100 a month for 24 months, that’s $2,400. Is your vehicle worth that much? Would it be advantageous to regularly set aside that money to put in a “rainy day” account for your vehicle? A Consumer Reports study found 55 percent of those who bought policies never used them. The study found the median price for the polices was $1,214 and the median out-of-pocket savings on approved repairs was $837, a loss of $377 to the policyholder.
  • Ask questions. If you decide to call a company, make sure to ask who administers the contract as that company will decide whether any claims will be approved. Research that company as well and ask for a copy of the contract before agreeing to the terms of the deal.

Resources for those who believe they were defrauded by a VSC company may register complaints at:

  • Better Business Bureau: Visit to file a complaint or call your local BBB.
  • Federal Trade Commission: Visit or call 877-FTC-HELP (877-382-4357).
  • State Attorney General’s Office: Contact the attorney general’s office for the state in which you live and where the business is located.
  • U.S. Postal Inspection Service: Visit regarding mailed solicitations.

Visit the BBB Auto Resource Center, your one-stop shop for all things auto. For more information or further inquiries, contact the Wisconsin BBB at, 414-847-6000 or 1-800-273-1002. Consumers also can find more information about how to protect themselves from scams by following the Wisconsin BBB on FacebookTwitterInstagram and YouTube.