We present tips from one of the industry experts that should help consumers with damaged credit understand how an auto service contracts can help them successfully complete a car loan
What we know
We know that borrowers, especially those with bad credit on tight budgets and financing their vehicle with a higher-risk auto loan, are particularly at risk for unforeseen vehicle expenses in situations that could typically be helped by either a new or used car service contract.
Here Auto Credit Express we know this is the case because for the past two decades we've been helping consumers with problem credit looking for online car loans find those dealers that can give them their best opportunities for car loan approvals.
And while today's discussion of both new and used car service contracts (in some cases mistakenly referred to as an "extended warranty") is being brought to you by the Service Contract Industry Council (representing the industry that offers them), the SCIC does bring up some very valid points.
A press release issued by the Service Contract Industry Council offers some guidance for consumers thinking of purchasing an auto service contract for either a new or used car. Here are some excerpts:
Why should I buy a service contract if a car comes with a manufacturer's warranty?
1. There are over 10,000 components on a vehicle; a manufacturer's warranty covers only a fraction of these parts.
2. A manufacturer's warranty does not cover steering, electrical, suspension, air conditioning, heating, fuel systems, brakes, and convenience packages such as a navigation system.
3. Manufacturers' warranties are based upon defects in material and workmanship and do not cover normal wear-and-tear.
What does an automobile extended warranty typically include?
1. Comprehensive bumper-to-bumper coverage, including the exhaust system, electrical system, the engine, gas tank, the heater and air conditioner, normal wear and tear, the leather seats and the sunroof, etc.
2. Regular maintenance
3. Access to pre-qualified, professional auto technicians
4. Twenty-four hour technical assistance
5. Roadside assistance such as towing
Should I Buy an extended warranty for a used car?
• Buyers of used motor vehicles need the protections offered by extended vehicle warranties for essentially the same reason that new cars buyers do – to cover repairs not included in a manufacturer's limited warranty and to continue protection after the warranty runs out.
• Extended warranties are not insurance. Most dealers offer minimal coverage (at least 30 days) for used vehicles to cover basic repairs but you are responsible for purchasing an extended warranty if you want to cover the cost of repairs beyond any manufacturer's warranty.
• There are only a few comprehensive warranty programs that will cover the full cost of repairs on your used vehicle. Some of those programs have a high deductible that requires you to pay for a portion of the work upfront.
The Bottom Line
Successfully completing an auto loan for consumers with less than perfect credit has a lot to do with maintaining their vehicle in running order. The purchase of a service contract - if and when it makes sense – and by following the tips outlined above means these borrowers will give themselves a better chance of that happening.
Another tip: research warranty prices before purchasing one. That way you'll know if the price the dealer quotes is fair.
One more tip: Auto Credit Express matches people with auto credit difficulties to those new car dealers that can offer them their best chances for approved car loans.
So if you find yourself in this situation and you're ready to reestablish your car credit, you can begin now by filling out our online car loan application.