The Importance of Used Car Service Contractsby Steve Cypher on Sunday, October 21st, 2012
Here at Auto Credit Express it’s our job to help credit-challenged applicants find a car dealer that can give them their best opportunity to receive an auto loan approval.
We’ve been doing this for the last twenty years and, during that time, we’ve learned a number of things about car shoppers hoping to reestablish their auto credit.
For one, some of them see absolutely no value in purchasing a used car service contract. Fair enough. Everyone is entitled to their own opinion. But for those of you out there still considering this option, I offer a true story.
Paul and used car service contracts
This is a story about my brother-in-law. I’ll call him Paul. Paul has lived in New York City for the past 28 years. As such, he never really had the need for a car and, truth be told, during most of those years he really couldn’t afford one. But he decided to go back to school, earning his bachelors degree and then to law school, earning a Juris Doctor degree. He went on to pass the New York bar exam and he currently practices law in the city.
During all that time, he never had a car and, thus, no car credit. Five and a half years ago he decided that he could finally afford a small car. Because of his limited car credit, he knew that he would have to pay a higher interest rate to begin with. Paul picked out a used Chevrolet Aveo – both for its size and to keep the payments and insurance affordable. The dealer offered to sell him an extended warranty, but he decided against it. After all, the Aveo only had 50,000 miles on the odometer.
Eighteen months later, Paul had to make an unexpected trip of about 900 miles. Halfway through the trip, the Aveo broke down. He ended up renting a car to finish the trip. Upon reaching his destination, he learned that the engine timing belt had broken and the Aveo needed a rebuilt engine. The total cost, including the rental car and motel (he had to stay overnight when the car broke down) came to nearly $1000.
Fortunately, he was able to pay for the repairs – Paul’s career is going well right now. In fact, he plans on buying another car later on this year and, because he paid like clockwork on the last one, he’ll qualify for a much lower interest rate.
If you’re still weighing the pros and cons of a used car service contract my question to you is this: If this happened to you, could you afford to do the same thing?
The Bottom Line
Here at Auto Credit Express we’ve witnessed a number of variations on this story, but not all have had the same happy ending – which is why we always recommend that people with low FICO scores that seriously want to repair their credit at least consider an extended warranty that covers most, if not all, of the loan term.
One more thing to consider: at Auto Credit Express we match applicants with dealers that can give them their best chance at auto loan approvals.
So if you’re ready to begin the process, you can start by filling out our online auto loans application.