New Cars – Beware the small print in service contracts

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You may be tempted to get a service contract on your new car after hearing it will cover all your repairs and provide towing and transportation while your car is in the shop.

But consider it carefully. The manufacturer’s warranty will cover almost everything on your car for several years. And your car insurance may already provide for towing and substitute transportation.

As far as taking care of “all” your vehicle repairs, that term takes on new meaning when you read the small print in the contract. You’ll find plenty of limitations.

Keep these two rules in mind when considering any optional service contract.

* You are not obligated to purchase it. And if you think you might, you don’t need to do it on the day you buy the car. Every car has its competitors. So do service contracts. Your automobile insurance company may provide an extended warranty, and it’s probably cheaper than the one offered by the dealership.

* You are obligated to know what the service contract says, fine print and all. If you expect it to cover a repair, you’d better understand what the limits, deductibles, and exclusions are. A simple technicality may negate the insurer’s responsibilities to make the repair. And what if you break down at the other end of the country? Will you have to be towed home to take advantage of the warranty?

A third point to consider is the source of this service contract. Who is backing it? The car manufacturer? The dealership? A third-party insurer? How is that third-party insurer rated? Will you be able to find it when your car is on the blink?

If you buy a service contract through the dealer, make sure you get written confirmation that the dealer paid the service contract company and that you’re “on file” with that company.

When it comes to service contracts, the last thing you want is a surprise.



All the best,



Timben