Most of us are familiar with the extended warranties we are asked to purchase at a dealership when we buy a new or used car. There are many aftermarket extended warranties being offered these days, as well.  An extended warranty is insurance against the possibility of a major repair.  It’s there just in case you need it.

Vehicle Service Contracts

In the past few years, a new type of vehicle service contract has come out that offers to extend your dealership warranty when it expires.  The National Highway Traffic and Safety Administration estimate that car repairs total $36 billion annually and that the number one cause of consumer credit card debt is car repair. Today’s cars are made up of 70% electrical and high-tech components, so people are tempted to have these contracts just in case a major component fails.

The Better Business Bureau, however, is receiving a large number of complaints against these contract providers, so they took a nationwide survey and found that 92% of respondents considered the selling tactics to be misleading or improper. Many said they were under the impression this service was through the auto manufacturer of their vehicle.  Others said the contracts were very confusing. The consumers who purchased these contracts have lost about $5 million collectively, or about $1,430 per person.

stick figure with question mark

If you are considering purchasing a Vehicle Service Contract that claims to extend your warranty, do so with caution. Ask these questions and always get something in writing!

  • How easy is it to use?
  • Can I use it at any repair shop anywhere I choose?
  • Do I have to pay the repair bill up front and be reimbursed? If not, how will the payment be handled?
  • What plan options are available and which repairs are included with each plan?
  • Do I have a deductible, and if so, how much?
  • Is the deductible per visit or per repair?
  • Do I have roadside assistance with my plan?
  • Do I have a rental car provided with my plan?
  • Is the contract transferable if I sell my vehicle?
  • Is the cost of the contract more than the car’s value?
  • Who is the seller of the plan, their address, administers, and insurers?
  • How are the claims processed?
  • Check all companies involved at