Most used cars are sold as is with no warranty but consumers with questionable credit that receive an auto loan approval should know that most of the vehicles they qualify for can be purchased with a used car service contract

Our experience

While pre-owned vehicles other than certified used cars typically don't come with any kind of warranty, most car buyers with bad credit can roll the cost of an auto service contract into their car loan.

At Auto Credit Express we're familiar with this practice because for the past twenty years we've been helping car buyers with problem credit looking for online auto loans find the right new car dealers that can offer them their best opportunities for auto loan approvals.

Used car warranties

For consumers with poor credit on limited budgets, our experience has shown that one of the keys for them successfully completing a high-risk car loan is making sure they don't encounter large unexpected repair bills.

This brings us to today's topic, used car service contracts – sometimes mistakenly referred to as a used car warranty or an extended warranty.

Car buyers with damaged credit

Most consumers will decide on a 2 or 3-year-old used car rather than a new one. In most cases it's because these vehicles are less expensive. But this decision also makes sense for a couple of other reasons:

1. New cars typically lose between 20% and 40% of their retail value in the first two to three years of ownership, which is what makes a two to three-year-old car that much more affordable.
2. With new vehicle quality is at an historic high, used cars are more reliable than ever.

But even given this kind of reliability we believe that buyers, especially those who are credit-challenged, should at least consider purchasing an auto

service contract. That's because in most states used vehicles, other than certified used cars or those with unexpired manufacturer's warranties, are sold "as is" without any express or implied warranties. When purchasing one of these vehicles, the buyer is responsible for all repairs.

Service contract

According to the FTC, "A 'service contract' is defined in Section 455.1(d)(7) of the Used Car Rule as 'a contract in writing for any period of time or any specific mileage to refund, repair, replace, or maintain a used vehicle [which is] provided at an extra charge beyond the price of the used vehicle.'"

Simply put, an auto service contract is essentially an insurance policy. In this case the buyer is betting that something will go wrong mechanically with the vehicle while the warranty company (the insurer) is betting it won't.

There's another thing to consider: Newer used cars may be more reliable, but they're also more complex. Black box engine electronic engine and vehicle systems make them more fuel efficient and safer but if something goes wrong these systems can be expensive to replace (in many instances they can't be repaired).

Finally, it's usually easier to budget an additional $25 to $35 a month rather than pay $300 or more – with no advance notice – for repairs to get a vehicle running again, especially for consumers on a tight budget.

Frequently buyers that are unable to afford these repairs are often forced to either take out a loan for a second car with a BHPH dealer or find public transportation.

All too often this situation can also lead to repossession since no one wants to make payments on a car they can't drive.

The Bottom Line

The tighter the budget, the more necessary it becomes to find a way to avoid unexpected vehicle repair expenses. Buyers, especially those that plan on using a subprime auto loan for financing as well credit repair, should take a moment to consider the advantages of a used car service contract.

Another good tip: Auto Credit Express specializes in matching applicants with auto credit issues to dealers that can offer them their best chances at getting approved auto loans.

So if you're ready to begin that process, you can start it now by filling out our online loan request form.