GMAC Insurance poses five questions along with the explanations even buyers with damaged credit should be asking before adding a new or used car extended warranty to their car loan payments
GMAC Insurance Answers Car Service Contract Questions
Our experience

Over the years we have noticed that car buyers, especially those consumers with poor credit who have recently been approved for an auto loan, can be taken in by the sales pitches from telemarketers touting used car service contracts.

That's because at Auto Credit Express, for more than two decades, we've been helping car buyers with bad credit that have been searching for online auto loans find those dealers that can offer them their best opportunities for auto loan approvals.

Used car service contracts

One of the better dealer backend products that credit-challenged borrowers should at least consider is a used car warranty – usually referred to by providers as a "VSC" or vehicle service contract.

The reason we encourage car buyers with low FICO scores to consider 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 them on tight budgets, the ability to get a vehicle repaired often means the difference between keeping their job and losing it due to the problems a lack of transportation would cause.

Five questions

But instead of just taking our word for it, no less an authority than GMAC Insurance has weighed in on the issue. Here is what they had 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."

According to GMAC Insurance, here are the five questions buyers should ask themselves before making a decision:

• 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 consumers know about vehicle service contracts, the easier it is to make an informed decision when the time comes to consider a "used car warranty."

At the same time, we have another tip for credit-challenged buyers: Auto Credit Express matches consumers with questionable car credit, many of whom believe their only option is a BHPH car loan, with dealers that can offer them their best opportunities for approved auto loans.

So if you're ready to establish your auto credit, you can begin now by filling out our online auto loan application.