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Auto Service Contracts

    Buying a car? You also may be encouraged to buy an Auto Service Contract to help protect against unexpected, costly repairs. While it may sound like a good idea, don't buy in until you understand both the terms of the contract and who is responsible for providing the coverage.
» The Auto Service Contract
» How Much Does It Cost?
» How Are Claims Handled?
» Length Of The Contract?

How Much Does The Auto Service Contract Cost
Usually, the price of the service contract is based on the car make, model, condition (new or used), coverage, and length of contract. The upfront cost can range from several hundred dollars to more than $1,000.00.

In addition to the initial charge, you may need to pay a deductible each time your car is serviced or repaired. Under some service contracts, you pay one charge per visit for repairs, no matter how many. Other contracts require a deductible for each unrelated repair.

You also may need to pay transfer or cancellation fees if you sell your car or end the contract. Often, contracts limit the amount paid for towing or related rental car expenses.

What Is Covered And Not Covered?
Few auto service contracts cover all repairs. Indeed, common repairs for parts like brakes and clutches generally are not included in service contracts. If an item isn't listed, assume it's not covered.

Watch out for absolute exclusions that deny coverage for any reason. For example:

  • If a covered part is damaged by a non-covered component, the claim may be denied.
  • If the contract specifies that only "mechanical breakdowns" will be covered, problems caused by "normal wear and tear" may be excluded.
  • If the engine must be taken apart to diagnose a problem and it is discovered that non-covered parts need to be repaired or replaced, you may have to pay for the labor involved in the tear-down and re-assembling of the engine.

You may not have full protection even for parts that are covered in the contract. Some companies use a "depreciation factor" in calculating coverage: the company may pay only partial repair or replacement costs if they consider your car's mileage.

» Part 1       » Part 2       » Part 3       » Part 4

Additional Information provided courtesy of AllDATA and Warranty Direct


© 2000-2006 Vincent T. Ciulla

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