In these difficult economic times, most consumers are counting on their vehicles to last longer. Everyday leasing 24 months or consumers changing cars three years going into oblivion. As a result, consumers are often ask us if they should buy an "extended warranty" in conjunction with the purchase of new vehicles. His desire is to be protected against the cost of repairs to the vehicle as it gets beyond the original factory warranty. They also want to be sure that they have protection in case the car is a lemon.
The first thing that a consumer must understand is that when they buy a contract to cover the cost of repairs beyond the original factory warranty that is usually not a "guarantee". A guarantee is a promise by the manufacturer or seller of a vehicle that is free of defects. A warranty is provided to consumers free of charge and accompanies the sale of the vehicle. When a buyer pays extra for what they believe is an "Extended warranty" this changes the character of the promise of guarantee of a "service contract".
Service contracts have the appearance and the language that most consumers, I think that is an extended warranty. Dealers will also often what the consumer is buying an extended warranty. This is not the case. A service contract is simply an agreement by the dealer or service contract company to pay for repairs to the vehicle, which are covered by the terms of service contract, for a specific period of time. A service contract is not a guarantee or promise that the vehicle does not have any defects. A service contract is more like an insurance policy of a guarantee.
What does this mean for consumers? A service contract backed by the vehicle manufacturer may appear to be a wise investment if the vehicle has problems beyond the factory warranty. However, consumers should realize that not all parts are subject to a service contract. If the problem with a vehicle which is caused by a non-covered part then the consumer is on the hook for the cost of repair.
A service contract backed by a company other than the manufacturer of the vehicle is not generally a wise purchase. It is often difficult to determine the financial stability of these companies. If the service contract company went out of business this might leave the consumer with no resource and a costly repair.
It is also important for consumers to understand that when a vehicle has defects during the warranty period, they may be protected by lemon law in your state. It confers the right to a refund of your purchase price of the vehicle or a replacement vehicle that meet specific requirements of State lemon law.
On the other hand, the California Supreme Court decided that a service contract does not give consumers full lemon law rights should a vehicle have problems covered by the contract of service. The consumer would be limited to damages for breach of contract, which may include the costs of repairs. But, that does not allow a consumer to obtain a refund or replacement of your vehicle to a service contract.
Some tips to help you make your decision whether to purchase a service contract.
1. generally, only consider contracts supported by the vehicle manufacturer. Be careful of the manufacturer's service contracts are not supported unless 100% sure of the company's financial stability.
2. read the terms of service agreement carefully before purchasing. Know what's covered and what is not covered. Remember how long you want to keep the car and the number of miles you drive each year. Not just rely on the dealer that you are covered.
3. If you buy a service contract with you keep meticulous records of maintenance. Lack of maintenance is often used as a reason for the service contract company to deny a request for repairs that would be covered.
4. Note that a service contract can give you some peace of mind for possible repairs beyond the original factory warranty, but you may not have the protection of the law of California lemon for violation of this service agreement.
Good luck on your new car purchase. Make sure you do your homework before signing on the dotted line.
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