Consumer Car Buying Advice Blog

Whether you choose to buy a vehicle service contract from the selling dealer or an outside company you should be sure that the company behind it is a legitimate one.

Purchasing a service contract

With the cost of new vehicles rising every year, we realize here at Auto Credit Express that most of our credit-challenged applicants that fill out our bad credit auto loan application and get approved by one of our dealers for a second chance car loan will decide that it makes more sense to go with a 2 or 3-year-old used car.  Coming to this conclusion makes a great deal of financial sense for a couple of reasons. For one, the quality and durability of used vehicles, as a whole, is at an all-time high. In addition, buying a one, two or three-year old vehicle helps you avoid the 15 to 30 percent depreciation that will most likely take place during these years.

We do recommend, however, that if you are purchasing a used car, whether it is with conventional financing or with a bad credit car loan, that you seriously consider purchasing a service contract that will cover the entire length of the loan.

There are a number of reasons for buying one if you have bad credit and are on a tight budget, not the least of which is that it may help you avoid large, unforeseen car expenses – one of the biggest reasons auto loans for bad credit buyers are forced into repossession.

We also encourage you to buy a service contract from the selling dealer. Buying your warranty from the selling dealer means that you’ll know where to go and who to see if you have problems with your car. You’ll also have someone to go to if you encounter issues with the service contract company.

Take it from experience: there is nothing more frustrating than having your car break down due to a problem with a supposed “covered” system and then having little or no recourse if the warranty company turns down the repair claim and having no one else to turn to.

Be aware of warranty scams

Take it from us, just as soon as you buy a used car (and even if you purchased a service contract from the selling dealer), you will be inundated with cards, letters and even phone calls from companies that “specialize” in used car service contracts. Many of these “warranty” companies will do anything to get you to part with your money. This is how they got your name and how the scam works:

These service contract companies buy lists that contain the names of consumers who have recently taken delivery of a new or used car. These lists are then divided up and given to telemarketers who call these new owners in order to try and sell them a service contract. The problem is that the sales pitch may contain information that is not always accurate. Among other things, customers have been told that:

1.    Their current warranty is getting ready to expire, when that isn’t true
2.    The company is selling them an extended warranty, which is not accurate (they are selling a service contract which does not “extend” the new car warranty and, in fact, may even overlap an existing warranty).
3.    The caller represents the selling dealer, when in fact they are calling on behalf of an independent service contract company.
4.    The caller represents the manufacturer, which is also not true.
5.    The service contract is a “bumper to bumper” warranty just like the factory new car warranty, which it is not.
6.    If they’re not fully satisfied with the service contract, they will get a full refund. In many cases, when the customer calls back to cancel the contract and get a refund, they’re unable to contact anyone at the company.

What to do

If you’re contacted by one of these companies, ask for a name, address and phone number. Remember, if you registered with the Federal Do Not Call List, they shouldn’t even be contacting you in the first place. Contact your Better Business Bureau as well as the Consumer Affairs department of your state and ask if the warranty company is licensed to do business in the state.

If you receive a solicitation in the mail, be sure to follow the same procedure before you contact the company to be sure it is legitimate.

The Bottom Line

Don’t spend your money on any type of service contract until you’ve done your research on the company. In most cases, you should first consider buying a service contract from the selling dealer. That way, if you have any issues, you’ll know who to contact (licensed local dealers also must adhere to your state’s consumer protection laws). Remember, as part of the research process, you can shop around for cost before you buy from the dealer to make sure their service contract is priced fairly.

For more car buying tips and answers to your questions on bad credit car financing, visit our web site at www.autocreditexpress.com. If you are serious about reestablishing your car credit, you can begin the process by filling out our online bad credit car loan application now.

Tags: Bad Credit, better business bureau, credit, repossession, service contract, service contract scams, vehicle service contracts, warranty

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