Vehicle Service Contracts
Vehicle service contracts are similar to an extended warranty for automotive vehicles, personal watercraft, and more. In layman’s terms, automobiles are a product. Just like electronic products such as a video camera or a laptop, these products come with a manufacturer warranty. This warranty is essentially a written guarantee by the manufacturer to either repair or replace defective parts or components free of charge to the customer. Manufacturer warranties offer consumer protection from defective products and are standard in most industries.
Nearly all new products come with manufacturer warranties. These warranties typically follow the vehicle during the manufacturers specified terms. Warranties help used products retain their value. These warranties are typically tied to a model and serial number, which have the date the item was manufactured (VIN or Vehicle Identification Number for automobiles). Many retail stores handle warranty claims and repairs by performing an RTV (return to vendor) when faced with a defective product. They might just swap out the product or deal with the manufacturer so they can perform repairs. During some circumstances, the customers are forced to deal directly with the manufacturer. This process can be frustrating for the consumer.
As the price of a product increases, the terms and conditions of warranties become more specific. The written guarantees from manufacturers often include clauses about abuse, unapproved adaptations to the product, improper maintenance, and more. These clauses often void the warranty because all products are designed with tolerances. Maintenance schedules are often outlined in the vehicle or product owners’ manual.
Automobiles have a bigger price tag than most products but they still come with manufacturer warranties.Manufacturer warranties are often void for abuse, improper adaptations, and more. Putting a lift on a truck with giant tires and redoing the suspension can cause excess strain on the engine. This is a prime examples of an adaptation that may void a powertrain warranty. The manufacturer has specifications for tire size, pressure, recommended oil, maintenance intervals, and more. Any certified service shop should have a good grip of manufacturer expectations for car maintenance. It is not uncommon however to have improper servicing void a manufacturer warranty. Always check with the manufacturer to verify coverage for a vehicle prior to purchasing it.
Vehicle service contracts are contracts between the administrator (warranty company) who serves as the obligor and the customer. Service contracts extend the warranty for the vehicle beyond the standard manufacturer warranty. Many contracts use add on mileage from the date of purchase to define the parameters of coverage. Service contracts may range from 6 month, 6,000 mile terms to 10 year 120,000 mile terms. This may be total coverage or add on mileage. For add on mileage, let’s use a vehicle manufactured in 2012 with 50,000 miles as an example. A 5 year, 60,000 mile service contract would extend the coverage for 5 years or until the odometer reads 110,000 miles (whichever comes first). The powertrain warranty would typically expire at 60,000 miles but the extended warranty adds years of coverage.
In addition to various terms, vehicle service contracts range in scope of coverage. Some contracts might only cover the powertrain (engine and transmission) while some contracts may be exclusionary which could cover all the vital components of the car except for a handful of listed exclusions. Air conditioning, steering, and many more items are usually covered by exclusionary warranty contracts. Price will usually increase with increased scope and length of coverage. Any decent F&I personnel will outline the different options for extended warranties and help the customer find the best value for their circumstances.
Just like manufacturer warranties, VSC’s outline scope of coverage and exceptions. Service contracts will not cover preexisting issues, abuse, and certain adaptations to the vehicle. Extended warranties are a contract between the customer and the warranty company. The terms and conditions are outlined in the contract. Many of the terms are boiler-plate (standard for extended warranties) but it is always important to read through the contract before purchasing a warranty.