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Four Ways to Get the Most Out of Your Service Contract

By Eve Chen () - April 22, 2019

When you purchase a new car—and often a used one, for that matter—you will typically be asked whether you want to buy an extended service contract (ESC) to provide coverage for repairs needed after your manufacturer’s warranty expires. Good question. Should you go for that extra peace of mind an extended warranty provides or save your money and put it directly toward future repairs. There is no one “right way” to answer this question, but consider these four factors:

  1. Coverage – This category “covers” a lot of ground. First and foremost, is to compare the coverage offered by the extended warranty with the original manufacturer’s warranty. If repair or replacement of an item is already included with the free manufacturer’s warranty, there’s no need to duplicate coverage through an ESC. And if you do need a replacement, find out whether the parts will be supplied by the manufacturer or a less-desirable after-market source. Also, be sure the time period or mileage amount covered by the policy is significantly greater than on the original warranty to get the most value—especially if you are purchasing a second-hand vehicle. Finally, make sure you know exactly what’s covered; does the ESC provide “bumper to bumper” coverage or just coverage for your car’s power train?
  2. Fees – When considering an ESC, be sure to read the fine print – every word of it! Some services may require deductibles or fees, so it’s important to understand exactly what other costs you may incur over the life of your contract. Note that there may be different costs involved depending on the service being provided, so it helps to get the full picture before buying.
  3. Claims – If you have a claim, find out who will handle it. Does the dealer take care of the repairs or will you be referred to a third party? Be sure you understand whether claims are valid if your problem occurs out-of-state, during non-business hours or if you have relocated.
  4. Maintenance – To get the most out of your car—and your manufacturer’s warranty—you need to comply with your car’s maintenance requirements. As a rule, ESCs don’t cover maintenance services, such as oil changes, brake repairs, filter replacements and fluid refills. In fact, some extended warranties may even become voided if you don’t take proper care of your vehicle.

Be sure to speak with your dealer’s sales rep or finance manager with questions, or contact the policy provider directly. Understanding the detail is the key to getting maximum value!

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