Ask Dr. Don By Don Taylor, Ph.D., CFA • Bankrate.com

Extended auto warranties

Dear Dr. Don,
We purchased new a 2001 Toyota Sienna and our warranty coverage will end soon. We've received an offer in the mail for an extended warranty that is guaranteed renewable and covers just about everything without any apparent stipulations. The annual rate was a surprisingly low $192. Are we missing something in the fine print or does this make sense that the "Toyota Warranty Division" would make this offer?
Thank you,
Cynthia Claim

Dear Cynthia,
"When something sounds too good to be true....." I had you send me the warranty offer, in part because I couldn't find anything on Toyota's Web site mentioning its warranty division. The auto manufacturer does offer extended warranties, but the offer that you received wasn't from Toyota.

Once I knew the name of the warranty provider, I went to the Better Business Bureau's Web site to find out if any complaints had been filed against the firm. Quite a few had, so many in fact that the BBB reports that "this firm has an unsatisfactory record due to unanswered complaints."

The Better Business Bureau also reported action by the State of Michigan in 2002 and the State of Alabama in 2001 to require the firm to change its business practices.

To my mind there are few things worse than a false sense of security. I recommend that you shop elsewhere for that warranty or consider saving that money by being self-insured. If you put $200 a year aside for auto repairs on your 2001 car, it wouldn't take long before you'd be able to pay cash for those unexpected repair bills. Plus, you may already have car rental coverage or towing coverage under your auto insurance policy or automobile club membership.

If you're convinced that you need extended warranty coverage, then read this Bankrate feature on how to buy that coverage.