Consumer Handbook: You Hear About Extended Auto Service Contracts, But What Are They?

Aug 28, 2019

Credit Chris Yarzab/Flickr, License: https://creativecommons.org/licenses/by/2.0/legalcode

No matter where you turn these days, you’re bound to read or hear about extended auto service contracts. If you’re not hearing about them on television or radio ads, you’re coming home to mailers telling you to have your contract activated immediately. 

If you’re confused by all of it, you’re not alone. Consumers nationwide continue to contact Better Business Bureau with inquiries and complaints about the vehicle service contract industry. Many of these companies call the St. Louis area home. Last year, BBB received more than 500 complaints involving 50 companies based in the region, and more than 518,000 consumers called BBB to check out these area businesses. 

What can you do to protect yourself and make a good decision, should you decide to purchase an extended service contract for your vehicle? Don’t be pressured into making an immediate decision. Mailers may tell you an immediate response is required, but that’s usually not true. Take a moment to investigate the company offering the service contract. Beware of any sales offer that requires you to “buy now” in order to get the best rate. 

Make sure you’re given a copy of a contract, and review it before you make a buying decision. Take a close look at the terms and conditions. Beware of claims that you’ll receive “bumper to bumper” coverage. This doesn’t mean every problem will be covered. Look for exclusions and disclaimers. Read over your manufacturer’s warranty and contact your dealer or manufacturer to make sure you are not purchasing duplicate coverage. 

Do the math; if you have an older vehicle, the cost of a service contract may be more than the value of the vehicle. And, as always, research the company and its owners carefully.