Extended Auto Warranties and Auto Service Contract
terms are used interchangeably.

They are a contract to promise to perform (or pay for) certain repairs or services as stated in the contract.
They are not a warranty as defined by federal law and should not be confused with the manufacturers warranty.

Extended Warranties may be purchased at some time after the original sale of the vehicle and will cost extra.

Manufacturers warranty comes with a new car and is included in the original price.
The separate and additional cost distinguishes an Extended Warranty from a manufacturers warranty.
 

Auto Extended Warranties by name are usually sold by the finance department of new car dealerships
at the time of the New Car purchase.

 ( Extended Warranties do not have to be sold by the selling dealer)
While it may be priced separately, it is usually added into the final price of the automobile purchase.
 It is not a required purchase item by manufacturers.

Auto Extended warranties can be purchased on any new or used car or truck at time of purchase or later as long as the vehicle meets the requirements of the company you are dealing with.

Auto Extended Warranties  /   Manufacturers Warranty Compared

Auto extended warranty does not necessarily cover the same things covered by a manufacturer's warranty which comes with the purchase of a new car and usually provides coverage for a set period of time and or mileage.
An extended warranty may or may not provide essentially the same coverage and benefits as the manufacturer's warranty.

You should research companies who offer vehicle service contract / extended warranty contracts?

The BBB advises consumers that the best use of your time will be pre-purchase research of the warranty companies offering vehicle service contracts / extended warranties.

• Do your homework. A  service contracts / extended warranty company that won't be there when you need it is not worth the price of the paper it is printed on.
  Check with the Better Business Bureau for a reliability report on the companies who offer vehicle service contracts with whom you are interested.
   
• Check with the regulatory agencies who oversee or license vehicle service contract companies in your state.
   
• Be a smart consumer. You will find a variety of automobile service contracts offering different terms and prices. Look for a company that spells out all the inclusions and exclusions up front.
  Also, don’t choose a company on price alone. Remember, many times you will get exactly what you paid for.
   
• Read and thoroughly understand the agreement, including all industry terms, before you sign. If you do not understand your rights and advantages under the contract, seek counsel from someone you trust to explain.
   
• Make sure everything you have been promised verbally is in writing and included in the contract. This should include details such as dates, prices, cancellation provisions, and all other requirements for making use of the service contract.
   
• Never sign a contract that includes blank spaces. For your protection, see that there are no areas of the contract that could be altered or changed.
• After both you and the company have signed the contract, keep a copy for your records. This copy of the contract is the only proof you have of the conditions of the agreement.

What should you look for in a vehicle service contract?

It is important to measure a vehicle service contract by its benefits to you as a vehicle owner. As a consumer, you can only accurately understand the coverage if you learn the terminology and standard industry requirements. The following are questions you should ask:

Does the Extended Warranty duplicate any manufacturer's warranty coverage?

Compare service contracts with the manufacturer's warranty before you buy. New cars come with a manufacturer's warranty. Some used cars will also have available the remaining factory warranty. Be sure you clearly understand this so you dont pay for what you don't need.

Who backs the Extended Warranty?

Find out who performs or pays for repairs under the terms of the service contract. Understand that while you may purchase the extended warranty from one company, your future dealing may be with a different entity. Depending on the extended warranty, it may be the manufacturer, the dealer, or an independent company.

Many vehicle extended warranty are handled by independent companies called administrators after the sale of the contract. If you have purchased such a contract, any future dealings with regard to vehicle repairs will be coordinated through the administrator. Acting as claim adjusters, the administrator is responsible for authorizing the payment of claims to any dealer or repair facility under the contract. Deal directly with the administrator if you need answers about how to initiate repairs or if you have a dispute over whether a claim should be paid.

Determine how you will be protected should your administrator go out of business. In some instances, the dealership may be obligated to perform under the contract. Likewise if the dealer goes out of business, the administrator may be required to fulfill the terms of the contract. Whether you have recourse is dependent on your contract's specific terms and /or any applicable state laws.

Check out the reliability of the dealer and the administrator. Ask for references of past customers and check them out. Also, contact your area's Better Business Bureau, and any local or state regulatory agency with oversight of vehicle service contracts. Make sure you have obtained verifiable addresses and telephone numbers for any prospective service contract companies.

Ask how long the dealer or administrator has been in business, and inquire about whether there is sufficient financial resources to meet their contractual agreements. For example, car dealers or dealer associations may set aside funds or buy insurance to cover future claims while some independent companies are insured against a sudden surge of claims. In some states, vehicle extended warranty are required to be underwritten by an insurance company.

How much does the extended warranty contract cost?

The price of a vehicle service contract will differ from company to company. However, in most cases the cost will be determined by the vehicle's make, model, and condition (new or used). Other cost factors will include coverage inclusions and the length of contract, both of which may be set by the company or available in options to the buyer. The up-front cost for a vehicle service contract can range from below a thousand to well over $2000.

In addition to the initial charge, you may need to pay a deductible each time your vehicle is serviced or repaired. A service contract may charge one deductible per visit for all repairs, regardless of the number, while another may require you to pay a deductible for each unrelated repair even if they are made on the same visit.

You want the one deductible per visit.

There could be other costs involved if the contract limits or has a set amount allotted for towing or related rental car expenses.

Extended warranty also can incur costs associated with the transfer or cancellation of the contract should you sell the vehicle or opt to end the contract prior to the contracted date.

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