Some Helpful Auto Warranty Tips

Auto Warranty 101

A service contract is a promise to perform (or pay for) certain repairs or services. Sometimes called an "extended warranty," a service contract is not a warranty as defined by federal law. A service contract may be arranged at any time and always costs extra; a warranty comes with a new car and is included in the original price. The separate and additional cost distinguishes a service contract from an auto warranty. Before deciding whether to buy an auto service contract, ask these questions: Does the service contract duplicate any auto warranty coverage? Compare service contracts with the manufacturer's warranty before you buy. New cars come with a manufacturer's warranty, which usually offers coverage for at least one year or 12,000 miles, whichever comes first. Even used cars may come with some type of coverage. You may decide to buy a "demonstrator" model - a car that has never been sold to a retail customer but has been driven for purposes other than test drives. If so, ask when warranty coverage begins and ends. Does it date from when you purchase the car or when the dealer first put the car into service?

Auto Warranty Coverage

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.