Is a lease protection plan worth it?

I just got this from one of my KTL clients about purchasing a lease protection plan:

I got a great deal on an Infiniti QX30 AWD Premium, and went I went to sign the paperwork, the finance guy wanted to sell me a premium lease protection package- $900 cost over 39 months, gets me free tire, rim, dent repair and $1,500 in lease return damage insurance. It’s cost is quite steep, compared to the cost of overall car insurance. I gave the ‘okay’ knowing I have 30 days to back out.

I’m guessing it’s not worth the cost- I’m leasing a vehicle because I don’t put that many miles on it, so less chance for damage. Is the lease protection package ever worth it?

Thanks,

Katherine

Here is my quick answer:

Buying a lease protection plan is almost never worth it.

In fact, in most cases, getting wear and tear insurance for a leased car is the biggest hustle going. Because most people who lease never claim this insurance in the end…

Instead, I recommend getting my KTL Leasing System to help you get the best new car at the lowest price – with $0 cash down.

What exactly is a lease protection plan

Once most people negotiate a new vehicle lease, we let down our guard after agreeing to a monthly price.

And this is when we are most vulnerable.

Because this is when we buy extras in the Finance and Insurance office.

One of the most profitable extras is the “excess wear and tear protection package.”

Almost all plans are sold by 3rd parties to the dealership for $300 to $500. The dealerships “flip” this and resell it to us for $600.00 to $1,500.00.

Some “signature” or “platinum” packages sell for more than $2,000.00.

For added appeal, some companies bundle wheel, windshield, and interior fabric/leather protection with a dent-service plan to “sweeten” the offering as a value bundle.

This represents HUGE profits to the dealership – especially to the F&I dude/gal (who almost always works on straight commission).

“Sellin’ like hotcakes”

This is one of the easier extras to sell, because it instantly appeals to our emotional hot buttons.

We get sold on these impressive benefits:

– Zero deductible and zero out-of-pocket cost for us at the time of any claim…

– We get peace of mind at the end of our lease…

– It “only” adds $25 or so to the monthly lease price.

The hidden truth about lease protection plan payouts

Once the lease protection plan is sold to us, the dealership collects their HUGE commission – then exits stage left…

Because the dealership has nothing to do with any claims.

And the dealership’s service department has no relationship with the protection company. (In fact, the service department HATES lease protection companies… they often pay 30% of their billable hour rate and often deny claims – see more about this below).

Unlike manufacturer warranties, most lease protection plans are handled by an unknown 3rd-party company.

And their claims’ reputation is awful.

Introducing the largest lease protection company you never heard of

One of the biggest 3rd-party warranty companies is Safe-Guard Products International.

They work with most of the dealerships in the United States.

You would think such a large company working with the biggest names in the auto business would have a stellar reputation.

But:

The opposite is true.

Check this out – Safe-Guard has just a 1.3 out of 5.0-star rating on Google Reviews:

lease protection google reviews

I have never, ever seen a company with less than a 2-star rating on Google. A 1.3 rating is just terrible.

And a quick search of their crowdsourced feedback tells us everything we need to know:

Safe Guard Products International (RipOffReport.com)
Safe-Guard Products International (Yelp)
Safe-Guard Products International (Yelp – extended)

Do we really need lease protection plan?

The truth is almost no one needs to get excess wear and tear protection from some anonymous, 3rd-party company.

Because most leases give us a damage allowance.

This ranges between $500 to $1,500 – sometimes more.

And most things we think are damages are not:

For example, if we have a dent less than the size of a quarter (and there is no paint removed), we do not have to worry.

Scratches shorter than the width of a credit card are considered normal wear and tear.

Most carpet stains are considered normal wear and tear.

The tread left on tires varies depending on the leasing company. Toyota hints that we can turn in a vehicle with almost bald tires (as long as no belts show through).

A cheaper way to pay for expensive damage

Even if we are charged for damage at the end of a lease, we are given the option to have it repaired yourself for less.

Sometimes a LOT less.

For example, paintless dent removal services can work a minor miracle on a door dent for about $150.

“Curb rash” (when we scrape our tire’s rims against a curb) can be reconditioned for about $125 each.

I once saw a long scratch on a Mercedes repaired like new for $250.

Windshield chips are usually covered FREE by our auto insurance policy – with zero deductible.

“Not covered”

Lease protection plans are riddled with limits and exclusions in their fine print…

(And of course, we do not invest the time to read this in the F&I office – because we are too excited to drive our new vehicle.)

The VAST majority of excess wear and tear protection policies limit and exclude the following:

Windshield replacement
It only repairs cracks and chips (in which most auto insurance policies cover this FREE anyway)…

Just 1 tire
Surprise, surprise – these policies only cover one tire – not 4. And the tire has to be damaged by a road hazard.

Even worse, damaged rims from blowouts are not covered if a new, replacement tire holds the seal.

And getting a tire alignment after a blowout is never covered.

Most warranties do not cover cosmetic damage

Horizontal panels are not covered
Roofs, hoods, and trunk lids are excluded (for example, from hail damage).

Dents with any paint blemish, chips, or scratches are not covered

Dents over 4 inches in diameter are not covered

Dents on a body/accent line are not covered

Scratches are not covered

Collision damage is not covered

Bumper damage is not covered

Part replacement or repainting is not covered

Technicalities & fine print

The wording of these lease protection plan contracts releases them from paying out almost any claim.

Take a look at this especially nefarious hustle:

Most lease protection plan contracts tell us a policy has a $1,000 per item limit for damage – $5,000 total.

Sounds great, right?

But:

This means if we suffer damage that costs a penny over $1,000, the entire claim is denied. Because according to the fine print, the damage has to be under $1,000!

But wait, there are more:

According to the fine print, a claim for damage in a construction zone is denied as well.

And this:

Tire coverage only covers one tire per claim. And that tire’s tread depth must be between 3/32″ and 9/32″. This means bald tires do not qualify.

I am not done:

According to their fine print, claims must be made within 24 hours or it is immediately denied.

In simple speak, most claims are denied and never get paid out.

Delays

The most common complaint is the delays:

lease protection plan delays

Delaying is a scammer’s common scheme to wear us out.

Most people either forget to follow up – or worse, give up.

And the worst part is third-party warranty companies require an in-person “evaluation”. This adds at least 2 days to be without our vehicle (besides the time for repairs).

A hit to cash flow

If we get lucky and have a claim approved, we better have enough cash (or credit) to fund the repair up front.

Because it usually takes months to receive reimbursement.

Again, 3rd-party warranty companies do not have direct relationships with the dealership’s service department. So we get charged when the work is done, then hope we get reimbursed.

Unlike insurance claims (which are overseen by state government agencies), there are no “warrantee oversight” agencies. As a result, warranty companies are under zero pressure to pay their claims on time.

The inconvenient truth about “30 days to back out”

This hustle is despicable.

Because in a lease contract, any lease protection plan cancellation returns the funds to the leasing company, not us.

Now, the leasing company might be honest and return our money at the end of the lease. But they are under no contractual obligation to do so.

Even worse, the refund is prorated – so the refund value plummets day after day.

And the worst part is canceling one of these warranties is a complete waste of time. Because not even a fraction of a percent of those trying to cancel ever see a penny…

Again, there is no government oversight of warranty companies. And they know it. So they use delaying and dodging to avoid giving refunds.

A MUCH better alternative to a 3rd-party lease protection plan

I get it.

We all want to drive an awesome vehicle at an awesome monthly price – without worry.

But the truth is the VAST majority of lease protection plans are worthless.

What I do is self-insure to protect myself, instead.

Instead of paying $25 extra a month and hoping a claim gets approved…

I take the same $25 a month and set up an auto-saving account. I have $25 a month automatically transferred into a simple savings “driving emergency” account. This account builds effortlessly over time – cash on hand if I need it to pay for any needed repairs (or emergencies).

No hassles.

No scams.

No “exceptions”

No fine print.

Free to choose anywhere to make the fix or repair.

And:

If you want to save a boat-load of money on your next car lease (and always get $0 cash down deals), I suggest reading the most popular posts I have written on this blog.