Extended warranties make sense when investing in a new car
Feb 07, 2013 | 11109 views | 0 0 comments | 18 18 recommendations | email to a friend | print

Extended warranties make sense when investing in a new car

By Timothy J. Meenan

Executive Director of the Service Contract Industry Council


With the start of the new year, many people are looking to make a fresh start:  Often that involves purchasing a new car.

The new 2013 model cars are appealing because of the many high-tech features they offer. Cars are now coming equipped with keyless ignition, rear view cameras, GPS, Bluetooth, touch screen consoles and many other new and exciting features.

When buying a new car, purchasing an extended warranty (also called a service contract) is a smart next step. Nowadays people tend to keep their cars much longer than the standard warranty period. If you plan on keeping your car past the manufacturer’s’ warranty, then investing in a service contract is a wise route to take.

Most vehicles come with a standard powertrain warranty and some come with a manufacturer’s “bumper-to-bumper” warranty.  Depending on the car and the plan, these warranties keep you covered for three years or 36,000 miles. However, the problem comes in once these basic warranties expire. With all these new technologies built into the cars, what kind of additional coverage is needed?

Also, it’s important to research exactly what’s covered in your basic warranty. Powertrain warranties only cover the engine, transmission and drivetrain, basically the parts of your car that make it go. Features like power steering, electrical, air conditioning and new technology convenience packages may not be included in a powertrain warranty.

The new technology involved with these cars can make repairs extremely costly. For example, the touch screen console controls most of the new technology in cars. This is how you manage most features in your car like the radio, Bluetooth and GPS. Think about what would happen if the touch screen console breaks down after the manufacturer’s warranty has expired. This is where the extended warranty can save you from costly repair bills.  Additionally, with technology becoming more complex, repairs can take longer. Service contracts typically pay for a rental car while your car is in the shop, which is a benefit manufacturer’s warranties are not likely to offer.  The rental car is available even during the period when the manufacturer’s warranty is still active. 

Another benefit is that most service contracts are transferrable, so if you sell your car, the new purchaser can also receive the peace of mind that comes with knowing the vehicle is covered even after the manufacturer’s warranty expires.  Many people have learned that they can sell their used car faster as potential buyers know they will be receiving the coverage of the service contract after they take ownership of the car.

By investing in a service contract for your car, you are protecting your investment and avoiding big out-of-pocket costs on the heels of a major investment. If you are planning to keep your car longer than the duration of a standard warranty, it’s especially important to protect your investment for the long haul.

When purchasing and utilizing an auto service contract consider these tips:

    • Read the provisions carefully and become thoroughly familiar with all coverage and exclusions

    • Check to see if the plan’s administrator is a member of the Service Contract Industry Council (www.go-scic.com), the service contract trade group that promotes the industry’s highest standards of quality and integrity

    • Carefully fulfill all obligatory responsibilities, such as regular oil changes, etc.

    • Keep the service contract paperwork and all maintenance records in a secure, easy-to-access location

    • Look to see if the provider is registered or licensed with the appropriate state agency.

About the author:  Mr. Meenan worked for over 7 years in the Florida Department of Insurance and Treasury, and currently serves as regulatory counsel for service contract companies, insurers, manufacturers, retailers and many other clients in Florida and throughout the United States.  Mr. Meenan also serves as the General Counsel for the Service Contract Industry Council.

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