You consider yourself a savvy car shopper. You have a love for details that helps you figure out what other zip codes are paying for certain vehicles. Your diligence grew a FICO score granting you the lowest loan APR available. And your attention to spending resulted in enough savings to knock any car debt repayment plan by years, if not completely.
Are you as aligned with the details of vehicle service plans, also referred to as extended warranties? By reading the fine print a little closer you can see what you could be missing when it comes to protecting your ride.
You've got to understand what you are getting into – or not
Any extended service plan needs to be read with you – the potential buyer – crafting a healthy list of questions, or concerns, when the language leaves something to be desired. You want to figure out what the plan covers, what it doesn't cover, when it stops coverage, and what it is you really need.
For example, Bumper-to-Bumper coverage is similar to a manufacturer’s original warranty: power steering, air conditioning, head gasket, suspension and other major or complicated components. Wear-and-Tear parts, on the other hand, like brake pads, rotors, tires, batteries, fluids, windshield wiper blades and other items that "wear" over time, can fall under normal vehicle maintenance. Meaning they are not covered in an extended service agreement (although some manufacturers offer new vehicle maintenance plans that cover some Wear-and-Tear parts and fluid changes for a specific period of time).
A good contract can be customized to your vehicle needs, meaning how much you drive, how long you want the coverage to last, and how much you can afford. However, rarely does a service plan cover everything. If it does, it might be too good to be true. When you do buy, always find out how long you have to cancel and obtain a full refund.
Figure out exactly what it costs you
Just like car insurance, you'll want to call around and get different quotes on premiums and deductibles. Don't be afraid to negotiate. If you like one reputable company's contract better, mention a competitor will provide you the same features for less – and are they will to do the same?
Your monthly premium cost buys you into a deductible: $100, $500, even larger or smaller. This is what you pay out-of-pocket for car costs before the contract saves your wallet. Because you have studied up, you know the head gasket is covered and will only cost you a fraction of the total bill. It's times like this when one gets to witness just how much these agreements are worth, especially if the vehicle's problems tend to repeat themselves.
A big cost headache is a vehicle breakdown. You want a contract that buys the convenience of using certified mechanics at any certified local repair shop – not one towed to the nearest dealer miles and miles away. You'll also want to find out if you must front costs for any repairs on a contract, only to later be reimbursed. Just get down to the nitty-gritty with the claims process.
Finally, you're expected to be a good steward to your car by conducting basic maintenance on your own dime. Forget about coverage kicking in if the reason for the breakdown is the fact you forget to check the oil.