Vehicle Service Contracts… BBB Says Beware

25 08 2011

Dale BertramMost of us are familiar with the new car or used car extended warranties we are asked to purchase at a dealership when we buy a car. There are many aftermarket extended warranties being offered today as well.  An extended warranty is insurance against the event of a major repair.  It is there just in case you need it.

In the past few years a new type of vehicle service contract has come out.  They are offering to extend your dealership warranty when it expires.  The National Highway Traffic and Safety Administration estimate that car repairs total $36 billion annually.  The number one cause of consumer credit car debt is car repair. Today’s cars are made up of 70% electrical and high-tech components so people are tempted to have these contracts just in case a major component fails.

The Better Business Bureau however is receiving a large number of complaints against these contract providers so they took a nationwide survey and found that 92% of respondents considered the selling tactics to be misleading or improper. Many said they were under the impression this service was through the auto manufacturer of their vehicle.  Others said they were very confusing. The consumers who purchased these contracts have lost about 5 million collectively or about $1,430 per person.

If you are considering purchasing a Vehicle Service Contract do so with caution. Ask these questions and always get something in writing!

  • How easy is it to use?
  • Can I use it at any repair shop anywhere I choose?
  • Do I have to pay the repair bill up front and be reimbursed or how will the payment be handled?
  • What plan options are available and what repairs are included with each plan?
  • Do I have a deductible and if so, how much?
  • Is the deductible per visit or per repair?
  • Do I have roadside assistance with my plan?
  • Do I have a rental car provided with my plan?
  • Is the contract transferable if I sell my vehicle?
  • Is the cost of the contract more than the car’s value?
  • Who is the seller of the plan, their address, administers and insurers?
  • How are the claims processed?
  • Check all companies involved at http://www.bbb.org.

In June, the principals at US Fidelis who used to be the largest retailer of vehicle service contracts were indicted on 27 criminal counts based on deception and fraud while marketing these contracts.

Buyer beware.

Happy Motoring,

 

 

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