Consumers buying a new or used vehicle at most dealerships will face pressure to purchase an "extended warranty" on that vehicle. Extended warranties are also known as "service contracts." Dealerships like to sell extended warranties because they make good profits for the dealership. But do they make sense for you? And how do you use one, if you already purchased it?
What are "automotive extended warranties"?
In simple terms, they are service contracts with a warranty company that agree to provide, under certain conditions, certain repair services for a certain period of time from an identified provider. As you might assume from the very general terms of this definition, the provisions and quality of extended warranties can vary greatly. Some are provided by national manufacturers or companies who stand behind their agreement; others are provided by fly-by-night companies based in states with weak consumer protection laws—companies that often take the money and fold before consumers can make many claims against their "warranty." As a consequence, consumers must examine any contract carefully and look at all the pros and cons for their individual situation.
When does buying a service contract make economic sense?
The average service contract costs the dealership very little but they frequently sell for thousands of dollars. Unless you are absolutely sure that you are going to keep a new vehicle for years beyond the manufacturer's warranty—and manufacturers' warranty terms are getting longer—then extended service contracts don't make financial sense for most people.
Many extended warranty terms, for example, overlap with manufacturer's warranties but the consumer can't make a claim against them until the manufacturer's warranty expires. So you might think that you've bought a six-year service contract, but the policy doesn't kick in until the manufacturer's warranty runs for 5 years or 50,000 miles. In effect, you've paid big bucks for a one- or two-year contract. Some service contracts also cover only limited repairs.
If you are buying a used vehicle that is no longer under the manufacturer's warranty, then a service contract may be more useful. But just as with a new vehicle, you must check out the terms and benefits just as you would for a new vehicle.
Give any service contract you are considering a very close inspection, read all the fine print, ask questions, and if you don't get satisfactory answers, don't buy it. Also negotiate the price. Then check our warranty product for competitive rates.
Tips for evaluating an automotive service contract
Making sure a service contract meets the following criteria won't guarantee that you, the consumer, won't get burned, but it can help.
Is the service contract provided by a national automotive manufacturer or a reputable national company? How long has the company been in business? What's their record of customer satisfaction?
Does the coverage term of the service contract begin after the manufacturer's warranty (or any dealership warranty on a used car) has expired? If it overlaps, does the contract provide "wrap-around" coverage, which means that the contract covers repairs not covered by the manufacturer's warranty? What are the actual years of coverage (those years after manufacturer's warranty ends) for which this service contract will be the only coverage?
Can you see a sample copy of the contract before you buy it? If you can't have a sample copy for review, think twice about considering that contract.
What services and repairs are covered under the terms of the contract? Does the warranty provide bumper-to-bumper coverage of both wear-and-tear and mechanical breakdown problems? Or does it cover just certain systems or parts? Or cover just mechanical breakdowns, not wear-and-tear failures? Experts advise that it's in the consumer's best interest that service contracts cover damage caused by overheating as well.
Does the contract require a deductible? How much? Is the deductible required "per visit" or "per repair"?
What entity under the contract provides the service for the vehicle under contract? Some contracts may require that the vehicle be serviced by a single service center, even if the breakdown occurred five hundred miles away. Better contracts allow the repair to be performed by any licensed, ASE-certified mechanic.
How is a claim or request for service made under contract? Must you get the contract administrator's okay before the repairs are begun? How quickly can you contact the contract administrator if that's the case? How quickly do they respond?
Does the service contract company (administrator) pay for the repair claims or does the consumer pay and get reimbursed? Avoid contracts that follow the reimbursement plan; it's too easy for the administrator to deny the claim.
Does the service contract company have a "claims reserve account" with a separate insurer to cover consumers with contracts should the company fail? If the company is insured by a separate entity, what is its insurance rating?
What are written policies on handling disputes over what repairs are covered and about handling problems with repairs made under the service contract?
Is the service contract transferable, if you sell the vehicle before the contract expires?
What's the warranty company's record with local and state consumer protection agencies, state attorney general's office or the Better Business Bureau?
Making a claim under an automotive service contract
Make sure that you fully understand the requirements under the contract. Ideally you did this before you bought the contract, but if not, do it as soon as possible. Most contracts require that you follow the manufacturer's or their routine maintenance schedule. It is also a safe practice not to drive the car after a problem occurs but have it attended to as quickly as possible. Running a car that is overheating, for example, is grounds for voiding most service contracts. If you have to call the contract administrator for a ruling on whether the proposed repair is covered under the service contract, keep the phone numbers and other information you need with the vehicle in a handy spot.
Prepared for Corning Credit Union by Remar Sutton & Associates, May 2004. Reviewed March 2007. All rights reserved.
Remember that old saying, “A stitch in time saves nine?” It doesn’t apply just to clothes. Taking a few minutes regularly to perform some simple maintenance, can keep your car or truck looking and running like new for years. Here’s a quick checklist.
Check the vehicle’s “vital signs” every time you gas up.
When you fill the gas tank, pop the hood and check the levels of oil, coolant, brake fluid, and power steering fluid. You’ll need a paper towel for the oil; most of the others can be checked at a glance in most vehicles. If the vehicle has windshield washer fluid, check that level also.
Many people are keeping their cars longer. According to a recent report by the research company R. L. Polk & Co., the median age of operational passenger cars in 2007 was 9.2 years. Take good care of your car or truck and it will give you many years of service. Extra service years can save you money long-term. In the current economic climate, all of us are looking for ways to trim our spending. Here's how to stretch the good life for your wheels.
Dealerships just love it when you trade in your old vehicle. Why? They give you "wholesale" for it (if you're lucky) then "retail" it to another customer, charging that customer thousands more.
Why should the dealership make that extra money? Why not pocket that money yourself by "retailing" your car to an individual rather than trading it? You may particularly wish to consider selling your vehicle if it's older but nice and reliable. Many people are looking for very affordable, but reliable transportation. So you can take a vehicle that a dealer might give you just a few hundred or thousand for and make more money. Both you and your buyer can come out ahead. Of course, you can also do well selling a newer vehicle.
Next to a home, automotive vehicles represent the largest expenditure for most consumers. Keeping those vehicles well-maintained and, when necessary, properly repaired can ensure many years of reliable service.
Types of Auto Service Centers
Dealerships. The service centers of new car dealerships provide warranty service and repairs for the models the dealership sells. (Some dealerships may also service other make vehicles.) Positive reasons for choosing a dealership may include: they should be thoroughly familiar with your vehicle, they should offer factory-trained technicians, and original factory (OEM) parts are usually quickly available. Repairs under warranty must usually be performed by an authorized dealership. Most dealerships offer decent guarantees on parts and labor. On average, however, dealerships tend to charge a bit more than other types of service centers.
Consumers buying a new or used vehicle at most dealerships will face pressure to purchase an "extended warranty" on that vehicle. Extended warranties are also known as "service contracts." Dealerships like to sell extended warranties because they make good profits for the dealership. But do they make sense for you? And how do you use one, if you already purchased it?
What are "automotive extended warranties"?
In simple terms, they are service contracts with a warranty company that agree to provide, under certain conditions, certain repair services for a certain period of time from an identified provider. As you might assume from the very general terms of this definition, the provisions and quality of extended warranties can vary greatly. Some are provided by national manufacturers or companies who stand behind their agreement; others are provided by fly-by-night companies based in states with weak consumer protection laws—companies that often take the money and fold before consumers can make many claims against their "warranty." As a consequence, consumers must examine any contract carefully and look at all the pros and cons for their individual situation.
More and more automobile dealerships across the country are adding mandatory binding arbitration clauses to contracts for new and used vehicles as well as to financing contracts. By signing the contract, the consumer is agreeing to binding arbitration to settle any future dispute and also waiving the right to sue or appeal—even if the dealership committed fraud.
Although voluntary arbitration can be a good tool for some disputes, mandatory, pre-dispute arbitration poses several real dangers to consumers. In fact, the dealers must agree it poses dangers—after all, they fought hard for a federal law that prohibits automotive manufacturers from requiring dealers to accept mandatory binding arbitration in contracts between the manufacturers and dealers!
As if the economic times haven't been tough enough, gasoline prices hit record highs in recent months. Even a few extra cents a gallon can add up quickly into lots of dollars. But, with some attention to the following tips, you can keep your costs for gasoline and for operating your vehicle as low as possible.
Saving on gasoline
No matter whether you drive a compact that averages 30 mpg or a SUV that averages 13 mpg, you can cut gasoline costs by paying attention to where you buy gas, how you maintain your vehicle, and how you drive it.
eBay has become the gorilla of vehicle sales virtually overnight—they’ve facilitated over two million vehicle sales since starting their program. What’s not to like about that?
A lot of things. Before you even head to the eBay site to simply poke around, think about this:
When you buy on eBay, you’re typically buying “sight-unseen.”
You usually don’t get to drive the vehicle.
You’re typically buying from total strangers, and they are usually far away.
Dozens of radio and TV ads from many different charities are currently flooding the airwaves suggesting that you donate your used car or boat. Are you considering it? If so, then you need to know how the 2005 changes in IRS rules might affect the tax deductibility of your gift. You also need to know how to check out the charity you're considering. This month's review will help you do these things wisely. Planning to donate to a charity but not necessarily a vehicle? You'll want to read this review too. I'm going to start with the most important thing—how to check out the charity so that you know your dollars will go where you want them to. Then, I'll share the technical details about vehicle donation.
Yes, you read that headline correctly. If you are thinking of buying a new or used vehicle and you want to save money, I recommend first taking five steps before you even think of heading to a dealership showroom or website to shop. When many of us feel that first itch for a new vehicle, we think first about dropping by a dealership to browse—look at a few models, lift a few hoods, check out a few prices. Not a great idea—dealerships love to see innocent browsers pull on to the lot. Or maybe, you just like to cruise the local dealership websites. That's a better idea, but still not one designed to save you money or to really help you find the right car for you and your family. Instead, when that itch strikes, stop and take these five steps. Your wallet will thank you.
With the big spike in gas prices in the autumn and higher winter heating costs predicted for the rest of this winter, consumers everywhere are looking for ways to save on energy costs. In past reviews, I've offered you tips for saving on fuel costs. Now thanks to some old and new tax incentives, you may also be able to benefit from specific tax deductions or credits for purchasing "clean-fuel" vehicles or taking certain energy conservation measures at home.
Auto Dealership Pressure on Customers Never Goes Away
February/March 2005
Here’s a piece of StraightTalk: Stop right now if you’re thinking about buying or financing a vehicle. More than ever, everything in the car business has become negotiable: the price of the car; the price of the loan; the value of your car; the cost of “add-ons” — even the cost of insurance or service agreements. Quite frankly, you can’t relax for a minute if you want the best deal or the best vehicle.
That’s why we want you to stop and visit StraightTalk before you start the car buying process.
Consumer Affairs agencies across the country get more complaints about poor auto repair service than almost any other area. Repair services and the skills of mechanics can vary widely. But in addition to selecting a service center wisely (see StraightTalk tips), using these ten tips can help you get satisfactory results working with automotive service centers and technicians.
If you're in the market for a new or used car, then you're probably spending a good bit of time trying to discover what vehicle's right for you. If you're shopping the StraightTalk way, then you've figured what you can afford to purchase and are previewing models and makes in your price range in the ads, on the Internet, and down at the dealerships. In the shopping excitement, however, many buyers overlook one crucial question: Can you afford to drive the vehicle after you bring it home?
Would it surprise you to know that even if you are looking at two vehicles in the same class—say two compact pickups, midsize sedans, or minivans—that the cost to own the two similar vehicles can vary widely. Smart buyers will check out the cost to own and operate that great set of wheels. You'll need to consider these factors.
Your Available Cash is the maximum amount you have to spend on a vehicle. This calculator enables you to determine 1) the amount of cash a vehicle loan will yield and 2) the total Available Cash from all sources, including the loan, you have to purchase the vehicle.
If the estimated amount of Available Cash is too little for the vehicle you would like to purchase, you have several options. A higher monthly payment and/or a longer loan term will typically yield higher initial Loan Cash, thus increasing your Available Cash. You may also want to consider alternative vehicles that better fit your budget.
To estimate the value of your trade, visit the Edmunds web site.
Current rates and terms for CCU vehicle loans are available on our
rates page.
This calculator is solely for
informational purposes. It gives you reasonably accurate results of your Available Cash. Results for your actual loan will vary based on your final rate and loan amount.
Consumer Guides 
Consumers buying a new or used vehicle at most dealerships will face pressure to purchase an "extended warranty" on that vehicle. Extended warranties are also known as "service contracts." Dealerships like to sell extended warranties because they make good profits for the dealership. But do they make sense for you? And how do you use one, if you already purchased it?
May 2008
Dealerships just love it when you trade in your old vehicle. Why? They give you "wholesale" for it (if you're lucky) then "retail" it to another customer, charging that customer thousands more.
Next to a home, automotive vehicles represent the largest expenditure for most consumers. Keeping those vehicles well-maintained and, when necessary, properly repaired can ensure many years of reliable service.
More and more automobile dealerships across the country are adding mandatory binding arbitration clauses to contracts for new and used vehicles as well as to financing contracts. By signing the contract, the consumer is agreeing to binding arbitration to settle any future dispute and also waiving the right to sue or appeal—even if the dealership committed fraud.
As if the economic times haven't been tough enough, gasoline prices hit record highs in recent months. Even a few extra cents a gallon can add up quickly into lots of dollars. But, with some attention to the following tips, you can keep your costs for gasoline and for operating your vehicle as low as possible.
December 2006
July 2006
January 2006
Auto Dealership Pressure on Customers Never Goes Away
May 2004
April 2004