Beware Of Dealer Dent Warranty Programs

The power has shifted in the car buying game. Because of a wealth of resources available online to research vehicles and price comparison shop, consumers now have the upper hand when negotiating the purchase price of a new vehicle. As a result dealerships no longer make much profit on the sales of new vehicles. The majority of the profits at a car dealership are generated from the service and parts departments.

The sales department does however have a secret weapon that generates tons of cash for the dealership. Meet the finance guy and his “add-on” products. Anyone who has bought a car at a dealership, knows the process. After you have decided on a vehicle and determined a purchase price with your salesman, you are sent to the finance department to work out how you will pay for your brand new automobile.

Most of the time the finance guy or gal will offer you several “add-on” products for only a few dollars more a month. Here is where most buyers make the mistake of purchasing extended warranty programs, prepaid service contracts, GAP insurance, wheel protection, paint protection, anti-theft vehicle tracking services, rust-proofing, and ding/dent service plans. Almost all of these products produce pure profit for the dealership and usually are not a good value to the car buyer.

For this article I will focus on the product that I have insider knowledge of, ding & dent warranties/service plans. I will share the knowledge I have gained from performing automotive dent removal since 2003 and servicing the claims on these policies for the past 5 years.

Paintless Dent Repair (aka. PDR) is a very effective technology that allows highly skilled technicians to remove dings and dents by slowly sculpting your car’s sheet metal back to it’s original form, all while maintaining the factory OEM paint finish. More information on the process can be found here.

Most dent repair service plans are NOT sold directly from your dealership/manufacturer. The plans are originated by a slew of third party companies. Almost all of these companies have NO experience with paintless dent repair and DO NOT employ their own dent repair technicians. They are simply insurance or holding companies that sell a product to the car dealership, which in turn adds a markup and then sells it to you. Most plans are sold to the dealership for $300-500. The dealership then sells the dent protection plan to you for $600-1500. Sometimes they will bundle wheel, windshield, and interior fabric/leather protection with the dent service plan.

I’ve spoken to some customers who have payed $2000 for a “signature” or “platinum” package. This is pure profit for the dealership. They love these plans, and are selling them like hotcakes. One dealership in my area generates more than $1 million a year selling dent repair service contracts. After they sell you the plan, the sales department at the dealership has no further responsibility with your dent repair claims in the future. The claims process is left up to either you or your dealership service advisor to execute with the third party warranty company. It is a tedious process that most service advisors are forced to do, in order to keep their customers happy.

If you are one of the 20% of people that actually make a dent repair claim here is how the process goes down.

  1. You call the 1-800 number to make a claim with the warranty company
  2. The warranty company then searches for a local dent repair specialist (like myself in the Washington, DC metro area). They call or send the provider the claim via email.
  3. The local provider must first check his email inbox and then decide to accept or pass on the claim.
  4. If accepted the local provider tries to call or email you to set a day, time, and location to repair the dent. Some dent repair technicians will come to you. Others, including myself, require you to come to a repair facility in order to have the claim completed. Keep in mind, you are not able to research and choose who repairs your car. That choice is left to the warranty company.
  5. The dent is repaired, you sign the claim form and then a wholesale payment (which can be as little as a ⅓ of the industry standard) is sent to the local provider 30-45 days later.

Now, if you have managed to wade through the many layers of phone calls and headaches to actually get your car in front of the dent repair technician, the next step is making sure the damage on your car is covered by the service plan. Most people that contact me with a claim usually end up disappointed when they discover the damage they have on their car is not covered. Here are just a few limitations and exclusions that most plans have:

  • Horizontal panels are not covered (roofs, hoods, trunk lids)
  • Dents with any paint blemish, chip, or scratch are not covered
  • Dents over 4 inches in diameter are not covered
  • Dents on a body/accent line are not covered

Also Excluded

  • Scratches are not covered
  • Collision damage is not covered
  • Bumper damage is not covered
  • Hail damage is not covered
  • Part replacement or repainting is not covered

Is it worth buying a dent repair service plan?

Well let’s do some math and try to determine if purchasing one of these plans is right for you. The typical door dent (about the size of a quarter) usually cost about $150 to repair. That price can vary slightly depending on the location, size, and depth of the dent. Most of these plans cover 3-5 years. Let’s say you payed $750 for your dent protection plan. That means you will have to make 5 dent repair claims before you break even on the contract. If you live next to a careless neighbor or coworker who dings you daily, it might be worth it. However, most people don’t even make a claim that is covered. Those that do make a claim and have their dent repaired rarely make a second claim. The “bean counters” know this, and that is why so many third party companies now offer this cash making machine to car dealerships.

In my opinion it makes more sense to save your money and contact a local dent repair provider that you can research and choose on your own terms, if you ever fall victim to a run away shopping cart. I will leave you with some great advice I learned in the 80’s from Nancy Reagan and McGruff the Crime Dog. They gave us an excellent tool to combat the neighborhood drug dealer pushing narcotics to kids back in the day. I think their sage advice transfers well to the car buying experience, and particularly when wrapping up your deal with the finance department.

“Just Say No”