Auto Service Contract Questionsby Steve Cypher on Sunday, September 9th, 2012
Car buyers with credit issues are prime targets to be taken in by sales pitches for questionable used car service contracts.
At Auto Credit Express, we have heard dozens of horror stories surrounding this issue during the past two decades. In fact, in addition to helping car buyers with credit problems find car dealers for their best chance at auto loan approvals, it’s the reason our website includes answers on subjects ranging from BHPH dealers to today’s topic: understanding vehicle service contracts.
One of the more important dealer backend products to consider if you have less than perfect credit and you’re financing a used car is a vehicle service contract – sometimes referred to as either a “VSC” or an extended car warranty.
The reason we encourage people with bad credit to look at one is that it’s a way of making sure they won’t face a financial crisis if their car breaks down. For many of these individuals, the ability to get a vehicle repaired often means the difference between keeping their job and losing it because they can’t get to work.
But don’t take just our word for it. Here is what GMAC Insurance has to say:
“Purchasing a VSC can be significant investment, and every consumer needs to consider his or her own unique circumstances and expectations,” explained Tom Callahan, executive vice president of GMAC Insurance’s Dealer Products and Services group. “A VSC with a reputable company can more than make up for its cost by covering future vehicle expenses, as well as providing consumers with peace of mind.”
Furthermore, according to GMAC, here are the questions you need to ask yourself:
• Is the contract easy to understand? Read the coverage terms before you purchase the contract — the scope of coverage should be clearly stated in the body of the contract.
• Do the coverage terms and limits make sense for your personal situation? Every situation is unique, but consumers should consider how long they plan to keep their vehicles and their typical annual mileage; the amount of the deductible in event of loss; whether coverage includes normal wear and tear; and the cancellation and refund terms. Ask yourself if the price seems reasonable for the level of coverage you are getting. If it seems too good to be true, it probably is.
• Does the contract offer additional benefits? Some VSCs will cover repair expenses that go beyond just parts and labor by offering rental car coverage or reimbursing costs due to trip interruption.
• Who is providing the coverage? As a general rule, a VSC should provide the right to make a claim against a licensed insurance company that
maintains proper financial reserves to pay those claims. Make sure you are dealing with a nationally recognized company that has demonstrated a long-term commitment to the product and their customers.
• Is it easy to receive coverage benefits? Is the repair process simple and convenient? Reputable VSC companies try to make the process of both purchasing and servicing the contract as easy for the consumer as possible. Consumers should investigate how claims are paid and if there are limitations on where vehicles can be repaired.
The Bottom Line
The more you know, the better you’ll be able to make an informed decision when it comes time to consider an extended car warranty.
Here’s something else: if you’re having car credit issues, Auto Credit Express can help you find a dealer for your best chance at an auto loan approval.
So if you’re ready to begin rebuilding your auto credit, you can begin now by filling out our online car loans application.