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Consumer Handbook: Considering a Vehicle Service Contract

flickr user Greg Gjerdingen (https://creativecommons.org/licenses/by/2.0/)

This week we’re talking about vehicle service contracts. For more than 20 years, the St. Louis region has been the epicenter for the vehicle service contract industry. Complaints against that industry are on the rise, a new Better Business Bureau study finds.

BBB warns consumers to use caution if purchasing a vehicle service contract without carefully reading the contract prior to purchase. The in-depth investigative study details the history of the VSC in the St. Louis region, the difference between a VSC and a warranty and the problems consumers report having with the product.

Consumers have told BBB they believe the mailers and commercials are misleading. Vehicle repairs they believed would be covered under policies purchased through the VSC marketing companies are sometimes later denied by policy administrators, which are separate companies. As a result, consumers may spend hundreds or thousands of dollars on repair costs they thought were covered under their policies, in addition to the VSC coverage cost.

In recent years, BBB St. Louis has seen a dramatic increase in complaints filed against VSC companies. From 2018 to 2020, complaints filed against VSC companies located in the St. Louis region nearly tripled, going from 544 in 2018 to 1,402 in 2020.

Here are tips on how to avoid losing money on a vehicle service contract.

Do your research. Before paying any money, research the administrator and marketing companies. Make sure you need it. Compare the contract with the manufacturer’s warranty.

Do the math. Before deciding whether to invest in a vehicle service contract, figure out how much it is going to cost. If you decide to call a company, make sure to ask who administers the contract as that company will decide whether any claims will be approved. Research that company as well and ask for a copy of the contract before agreeing to terms of the deal.

Cape Girardeau native Whitney Quick is the Regional Director of Better Business Bureau in Cape Girardeau, MO, and is responsible for outreach efforts in Southeast Missouri and Southern Illinois. Quick is a graduate of Cape Girardeau Central High School and Southeast Missouri University where she majored in public relations. Quick enjoys helping educate consumers in the southeast Missouri region by sharing consumer tips with groups and educating them about BBB’s resources.
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