What to know about auto service contracts and extended warranty scams (2024)

FAQs

What is the difference between an extended warranty and a service contract? ›

Extended warranties are an optional add-on product that covers defects or failures that are not covered by the manufacturers' warranty. Service contracts or prepaid maintenance plans are additional add-on products that cover regular maintenance or other service needs.

In general, extended warranties can provide peace of mind and protection for consumers, especially for expensive products such as cars, appliances, or electronics. If the product is likely to require costly repairs, an extended warranty may be a worthwhile investment.

Legitimate Motor Vehicle Service Notifications will provide you with verifiable contact information, including a phone number, email address, or website. If the notification lacks this information or the provided details do not match the official contact information of the service provider, it is likely a scam.

Warranties cover defects in materials and workmanship which are under the control of the manufacturer and are typically “bumper to bumper”. Service contracts, on the other hand, typically cover a list of parts and components, not the entire vehicle.

Vehicle service contracts can be separated into two main types: the powertrain warranty and the Exclusionary Coverage warranty. You can find out about each specific warranty, its coverage, and more below.

Extended warranties don't cover everything that can go wrong with a purchase, and they are expensive to boot. Your purchase likely comes with a manufacturer's warranty, and the retailer you buy it from may also stand behind it. The best credit cards also offer purchase protection.

Because dealerships profit more from aftermarket sales than from new car sales, they hope to be your primary source for an extended car warranty. Dealers want to make the car buying experience as easy and efficient as possible, so they will try to sell you a warranty based on convenience and accessibility.

To be worth the price charged for the repair or claimed via warranty, ROs must capture the 3C's: complaint (beginning), cause (middle), and correction (end).

After getting quotes from the best car warranty companies, we found that extended warranties cost an average of $108 per month with a total average cost of $2,845.

What are two of the things should you consider before getting an extended warranty? ›

Vehicle mileage: The higher the mileage, the more your car warranty will cost. This is because your vehicle is more likely to need major repairs than one with low mileage. Vehicle make and model: If you drive a make or model that's expensive to repair, you'll end up paying more for an extended warranty.

Like most warranties, extended warranties and vehicle service contracts don't cover routine maintenance, wear items such as tires, brakes or wiper blades, collision damage or damage resulting from lack of maintenance or abuse. You should not expect heavily modified vehicles to be covered.

Research the fair market value for the vehicle you want to buy. Never buy a vehicle that you can't see in person. If you can't inspect or test-drive a vehicle prior to the purchase, consider it a scam. If the seller demands an advance payment, walk away.

Deciphering Warranties: What They Promise and How They Operate. With a warranty, the dealer is essentially telling the customer the vehicle will not break, but if it does here is how we will fix it. Under a service contract, the dealer is not making any representation about the current or future condition of the car.

Find out what limitations apply. Does it cover accidental damage? Can the company deny coverage if, for example, you don't follow their instructions for routine maintenance? Does it cover only specific parts of the product or specific repairs?

Service contracts, sometimes called extended warranties or maintenance agreements, are bought separately from the product. Similar to insurance policies, these contracts assure consumers that should something go wrong with a product, their investment is protected at a fraction of the cost of out-of-pocket repair work.

If you are buying a new car and the length of the service contract is similar to that of the manufacturer's warranty, it's probably not worth your money. Most new cars don't require many repairs during the first few years. And if your car does need repairs, they're likely to be covered by the manufacturer's warranty.