Updated Tips for Buying an Extended Vehicle Warranty for a New or Used Vehicle

Share Article

In a recent Service Contract Industry Council (SCIC) press release, "Tips for Buying an Extended Vehicle Warranty for a New or Used Vehicle" (2.16.12), the SCIC inadvertently and unintentionally provided inaccurate information regarding warranty coverage provided by automobile manufacturers. The SCIC sincerely apologizes for imparting any information that might discredit the integrity of automobile manufacturers nationwide. The corrected and updated "Tips for Buying an Extended Vehicle Warranty for a New or Used Vehicle" follow:

Tips for Buying an Extended Vehicle Warranty for a New or Used Vehicle

Why should I buy a service contract (often referred to as an extended warranty) if a car comes with a powertrain warranty?

  •     There are over 10,000 components on a vehicle; a powertrain warranty covers only a fraction of these parts.
  •     A typical powertrain warranty does not cover steering, electrical, suspension, air conditioning, heating, fuel systems, brakes, and convenience packages such as a navigation system.

What does an automobile service contract typically include?

  •     Comprehensive bumper-to-bumper coverage, including the exhaust system, electrical system, the engine, gas tank, the heater and air conditioner.
  •     Access to pre-qualified, professional auto technicians
  •     Twenty-four hour technical assistance
  •     Automobile extended warranties may also include discounted maintenance, such as oil changes, quick repairs at pre-qualified service centers, towing and rental cars.
  •     Coverage for normal wear and tear may be available under some, but not all, service contracts.

Should I buy an extended warranty for a used car?

  •     Buyers of used motor vehicles need the protections offered by extended vehicle warranties for essentially the same reason that new cars buyers do – to cover repairs not included in a manufacturers limited warranty and to continue protection after the warranty runs out.
  •     Extended Warranties are not insurance. Most dealers offer minimal coverage (at least 30 days) for used vehicles to cover basic repairs but you are responsible for purchasing an extended warranty if you want to cover the cost of repairs beyond any manufacturer's warranty.
  •     There are only a few comprehensive warranty programs that will cover the full cost of repairs on your used vehicle. Some of those programs have a high deductible that requires you to pay for a portion of the work upfront.

How are claims handled?

  •     Nearly 10 million automobile extended service contracts are sold annually, and approximately 95 percent of claims submitted to SCIC member companies are resolved to the customer’s satisfaction.
  •     A consumer may be able to choose among several service dealers or authorized repair centers. In some cases, the consumer must return the vehicle to the selling dealer for service.
  •     Many service contracts are backed by A+ rated insurers, who provide additional financial solvency on long-term contracts.
  •     As with most laws, there may be exemptions from certain requirements. It is important for consumers to research the company offering the service contract as well as any insurer backing it.

Consumer Obligations:

  •     Read the contract provisions carefully and understand all coverage and exclusions
  •     Keep detailed records, including contract paperwork, receipts, and maintenance records
  •     Adhere to all manufacturer's recommendations for routine maintenance, such as oil and spark plug changes. Failure to do so could void the contract.
  •     Identify the name of the service contract provider on the contract. If a contract does not list an administrator’s contact information, contact your state Department of Insurance or the Better Business Bureau to determine if the company is authorized to do business in your state.
  •     Check if the plan’s administrator is a member of the Service Contract Industry Council

Consumer Tips:

  •     Many, but not all, service contracts cover normal wear-and-tear and may fill in coverage gaps in the manufacturer’s warranty for up to 7 years and/or 100,000 miles
  •     In many states, service contracts come with a “free look” period, usually 30 days. If a consumer believes they acted impetuously, the contract can be return for a full refund during this period.
  •     Do not buy a service contract if the provider will not supply you with a copy of the contract terms and conditions prior to purchase.
  •     Be alert to service contract providers who use unsolicited mass marketing techniques, such as direct mail and telemarketing (e.g. “robo-calls”).

ABOUT THE SCIC (http://www.go-scic.com) :
The SCIC played a significant role in the development of the SCIC Model Act, a legal framework adopted by the National Association of Insurance Commissioners whereby service contracts are defined, may be sold and are regulated on a state-by-state basis. State laws based on the the SCIC Model Act were instrumental in protecting consumers with service contracts in 2008-2009 following the closure of hundreds of auto dealerships nationwide. Currently, over 35 states have adopted the SCIC Model Act. The Service Contract Industry Council (SCIC) works directly with state legislators nationwide to regulate the licensing of motor vehicle service contract providers, mandate significant consumer protections and to implement stringent financial safeguards.     

Jane Meehan Lanzillo
on behalf of the SCIC
617 417-0078 (c)
617 244-0448 (o)

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Jane Meehan Lanzillo
on behalf of the SCIC
617 417-0078
Email >
Visit website