Tips for Buying an Extended Vehicle Warranty for a New or Used Vehicle

March 6, 2012 -- (Tallahassee, FL) – The Service Contract Industry Council (SCIC) works
directly with state legislators nationwide to regulate the licensing of motor vehicle service
contract providers, mandate significant consumer protections and to implement stringent
financial safeguards. The SCIC offers the following tips for consumers thinking about
purchasing an extended vehicle warranty.

Why should I buy a service contract (often referred to as an extended warranty) if a car
comes with a powertrain warranty?
 There are over 10,000 components on a vehicle; a powertrain warranty covers only a
fraction of these parts.
 A typical powertrain warranty does not cover steering, electrical, suspension, air
conditioning, heating, fuel systems, brakes, and convenience packages such as a
navigation system.

What does an automobile service contract typically include?
 Comprehensive bumper-to-bumper coverage, including the exhaust system, electrical system, the
engine, gas tank, the heater and air conditioner.
 Access to pre-qualified, professional auto technicians
 Twenty-four hour technical assistance
 Automobile extended warranties may also include discounted maintenance, such as oil changes,
quick repairs at pre-qualified service centers, towing and rental cars.
 Coverage for normal wear and tear may be available under some, but not all, service contracts.

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 manufacturers 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
 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.

How are claims handled?
 Nearly 10 million automobile extended service contracts are sold annually, and
approximately 95 percent of claims submitted to SCIC member companies are resolved
to the customer’s satisfaction.  A consumer may be able to choose among several service dealers or authorized repair
centers. In some cases, the consumer must return the vehicle to the selling dealer for
 Many service contracts are backed by A+ rated insurers, who provide additional financial
solvency on long-term contracts.
 As with most laws, there may be exemptions from certain requirements. It is important
for consumers to research the company offering the service contract as well as any
insurer backing it.

Consumer Obligations:
 Read the contract provisions carefully and understand all coverage and exclusions
 Keep detailed records, including contract paperwork, receipts, and maintenance records
 Adhere to all manufacturer's recommendations for routine maintenance, such as oil and
spark plug changes. Failure to do so could void the contract.
 Identify the name of the service contract provider on the contract. If a contract does not
list an administrator’s contact information, contact your state Department of Insurance or
the Better Business Bureau to determine if the company is authorized to do business in
your state.
 Check if the plan’s administrator is a member of the Service Contract Industry Council

Consumer Tips:
 Many, but not all, service contracts cover normal wear-and-tear and may fill in coverage
gaps in the manufacturer’s warranty for up to 7 years and/or 100,000 miles
 In many states, service contracts come with a “free look” period, usually 30 days. If a
consumer believes they acted impetuously, the contract can be return for a full refund
during this period.
 Do not buy a service contract if the provider will not supply you with a copy of the
contract terms and conditions prior to purchase.
 Be alert to service contract providers who use unsolicited mass marketing techniques,
such as direct mail and telemarketing (e.g. “robo-calls”).

The SCIC played a significant role in the development of the SCIC Model Act, a legal
framework adopted by the National Association of Insurance Commissioners whereby service
contracts are defined, may be sold and are regulated on a state-by-state basis. State laws based on
the the SCIC Model Act were instrumental in protecting consumers with service contracts in
2008-2009 following the closure of hundreds of auto dealerships nationwide. Currently, over 35
states have adopted the SCIC Model Act.

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Media contact:
Jane Meehan Lanzillo