An automotive service contract (sometimes called an extended warranty, service agreement or a maintenance agreement) is an agreement to cover the cost of certain repairs in the event of a breakdown or other type of malfunction that is covered by the terms of the contract. It is completely different from the manufacturer’s warranty which usually offers coverage for at least one year or 12,000 miles, whichever comes first. This contract (known as a warranty) is different from a service agreement, in that it is built into the purchase of a new vehicle. On the other hand, a service contract costs extra, and may be arranged at any time after purchase of the vehicle. Essentially, it guarantees you will not be left to your own devices if something unforeseen happens to your car for the duration of the contract. Although you can purchase the contract from the same dealer you bought your used car from, this is not essential. Also read Here are the top 13 mistakes that people make when buying auto insurance.
Although purchasing an auto service contract can be expensive, not purchasing one can be even more expensive. This is because the amount of electronics and advanced technology that comes with today’s vehicles makes doing your own repairs and maintenance almost impossible. Although cars of today are generally safer and more reliable than they were in the past, they are a lot more expensive to fix if something happens to go wrong. Other than very basic functions such as oil changes, you need a laptop computer and the manufacturer's software to perform even the most basic functions that would have been considered routine back in the day.
When you buy a brand new car, it comes with the full manufacturer’s warranty included in the original price. This means you won’t have to worry about being without a car if yours breaks down. This is the best kind of warranty to get because it is free with an extensive coverage. You also get free roadside assistance for the duration of your warrantee. On the other hand, with a used car you’ll have to pay extra for your warrantee, and will probably be required to pay the entire amount upfront.
It is not unheard of to find oneself stuck with costly repairs even after you’ve paid for that expensive contract. Don’t let yourself get caught out. Make sure you get written confirmation that your service contract is in effect. Don’t rely on spoken promises, as they may be difficult to enforce in a court of law.
It is important to read the entire contract, especially the fine print before signing. For example, "bumper to bumper" coverage may not mean what you think. Car dealers are not obligated to explain every detail of the contract to you. With this in mind, they’ll be quick to explain what the service contract will cover, but will, in most cases, intentionally leave out what it doesn’t cover or the stipulations and guidelines you must follow in order to get the coverage you have paid for. For example, you may be required to stick to the manufacturer's recommendations for routine maintenance, such as oil changes, fluid services, spark plug changes, etc. If you fail to have your vehicle serviced according to the maintenance schedule in the manufacturer’s owner manual, you could find yourself in breach of the terms and conditions of the contract which could void the contract.
