If you are shopping for a new or used car or if your vehicle warranty is about to expire you should consider an extended auto service contract. Auto service contracts are a great way to deal with unexpected vehicle repairs.
An auto service contract is a promise to perform or pay for certain service or repairs. Sometimes called an “extended warranty,” a service contract is not the same as a vehicle warranty. A service contract may be arranged at any time while a warranty comes with a new car and is included in the original price.
Before deciding you buy an auto services contract ensure you know the following:
- Cost of the auto service contract. Usually, the price of a service contract is based on the vehicles make, model, condition (new or used), amount of coverage and length of contract. Costs of the service contract may vary. There may be a deductible if your car is repaired or serviced.
- Understand what is covered and not. Most auto service contracts won’t cover every repair. Be alert of absolute exclusions that deny coverage for any reasons.
- Who backs the auto extended warranty? It could be a manufacturer, the dealer, or an independent company. Extended service contracts are often sold by dealers and handled by independent companies called administrators. Administrators are claims adjusters who authorize the payment of claims.
- How are service claims handled? When your car needs to be serviced or repaired some service contracts permit you to choose service dealers or authorized repair centers. Others require you to return the vehicle to the dealer for service.
Find out if you need authorization from the contract provider before authorizing any repair work or towing services.
Find out how long it takes to obtain authorization or if you can get authorization outside normal business hours.
- What are your responsibilities under the contract? You may have to follow the manufacturer’s routine maintenance program such as oil and spark plug changes. Failure to do so may void the contract. Keep detailed records, including receipts to prove you serviced the vehicle properly. Find out who is authorized to perform the routine maintenance. In some cases a contract may specify the selling dealer is the only authorized facility for servicing the car.
- What is the length of the service contract? If the service contract lasts longer than you expect to own the car find out if the warranty can be transferred when you sell the car. Find out if there is a fee or if a shorter contract is available.
Make sure you thoroughly read and understand the agreement and once the contract is signed keep a copy of it for your records.
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