How Long Will You Keep the Vehicle?
If your vehicle is brand new and you plan to sell it before the bumper-to-bumper warranty expires, you probably don’t need an extended service contract, often referred to as an extended warranty. If you might keep the vehicle longer, you may want to buy an extended service contract while the car is still under factory warranty. If the extended warranty is transferable, it may increase the vehicle’s resale value—at the very least it demonstrates to prospective buyers that cared about your vehicle.
Decide How Much Coverage You Want
Do you just want protection from a major, expensive repair or are you looking to cover any repair that may be needed? Bumper-to-bumper protection is available, but is more expensive than coverage that only covers major components. Be sure to compare “breakdown” coverage and “wear-and-tear” coverage to understand the differences.
Do Your Research: Who Offers the Coverage You Want?
Dealers, manufacturers, independent companies, and service shops all offer policies, with detailed information and special offers available online. Check the company’s history, particularly how long it has been in business, and it’s also a good idea to contact the Better Business Bureau. Check with the dealer or shop that performs your vehicle maintenance to see what policies they recommend and be sure to do your research online.
When Does the Coverage Begin?
Some contracts require that you schedule and pay for an inspection before the policy goes into effect, while others have a time and/or mileage waiting period. Both are designed to prevent owners from purchasing a contract to cover the repair of a pre-existing condition. You cannot wait until your vehicle needs a repair and then buy the policy.
Find Out How Claims Are Paid
Many contracts pay the service shop directly with a company credit card when the repair is completed, eliminating the need for you to pay for the repair and apply for reimbursement. If you use a shop regularly, find out if they are familiar with the payment process for the policy you are considering. Also determine if there is a pre-approval process to be sure that any covered claims are paid.
Find Out How the Deductible is Applied
Is the deductible applied for each trip to the shop, or is it applied to every repair? In other words, if you have more than one repair done on the same trip to the shop will you be responsible for more than one deductible?
Find Out What is Covered—and What Isn’t
Does the policy cover diagnostic time, roadside assistance, rental car charges and towing? Many policies do, but be sure to check the details if you want these different forms of coverage. Diagnostic time can be more expensive than the actual repair if the problem is difficult to diagnose.
Just as flexibility and negotiation are factors in the purchase of many automobiles, there is often flexibility in the pricing of a service contract, especially for policies offered by dealers or service shops. Be sure to compare prices. Special offers may already seem discounted, but don’t be afraid to make an offer.
Determine Where the Contract Is Honored
Will you be traveling or moving to another state? Is the contract honored in all states, Canada and Mexico? What are the restrictions or limitations on emergency repairs when you are traveling? Asking these questions up front can save many headaches when you are on the road.
Review Your Contract: Is Coverage What You Expect?
Be sure to review the coverage in detail, paying particular attention to the “exclusions” or “what is not covered” in the actual contract. Do not rely on promotional or sales materials—read the entire contract to be sure the coverage is what you need and expect.