Service Contracts

Service Contracts


When you buy a car, you may be offered a service contract,
which you can buy for an extra cost. In deciding whether you
want a service contract, consider:

* Whether the warranty that comes with your car already
covers the same repairs that you would get under the
service contract or whether the service contract
protection begins after the warranty runs out. Does the
service contract extend longer than the time you expect to
own the car? If so, is the service contract transferable
or is a shorter contract available?

* Whether the vehicle is likely to need repairs and their
potential costs. The value of a service contract is
determined by whether the cost of repairs is likely to be
greater than the price you pay for the service contract
protection.

* Whether the service contract covers all parts and systems
of the car. Check out all claims carefully. Claims that
coverage is "bumper to bumper" may not be entirely
accurate.

* Whether there is a deductible required, and, if so,
consider the amount and terms of the deductible.

* Whether the contract covers incidental expenses, such as
towing and the costs of a rental car while your car is
being serviced.

* Whether repairs and routine maintenance, such as oil
changes, can be performed at locations other than the
dealership from which you purchased the contract.

* Whether there is a cancellation and refund policy for the
service contract, and what the costs are if you cancel.

* Whether the dealer or company offering the service
contract is reputable. Read the contract carefully to
determine who is legally responsible for fulfilling the
terms of the contract. Some dealers sell service contracts
that are backed by a third party. If a third party is
responsible, you may wish to ask if the company is insured
and to check the company's performance with your local
Better Business Bureau.

If a service contract is offered, the dealer must mark the
box provided on the Buyers Guide, except in those states that
regulate service contracts under their insurance laws. If the
Buyers Guide does not include a reference to a service
contract, and you are interested, ask the salesperson whether
one is available.

When you purchase a service contract from the dealer
within 90 days of buying the vehicle, federal law prohibits the
dealer from disclaiming implied warranties on the systems
covered in that service contract. For example, if you buy a car
"as is," the car normally will not be covered by implied
warranties.

But if you buy a service contract covering the engine, you
automatically get implied warranties on the engine, which may
give you protection beyond the scope of the service contract.
Make sure you receive a written confirmation that your service
contract is in effect.