Pro-Guard International

This company sells extended auto warranty plans.

An auto service contract is a promise to perform (or pay for) certain repairs or service. Sometimes called an “extended warranty,” a service contract is not a warranty as defined by federal law. A service contract may be arranged at any time and always costs extra; a warranty comes with a new car and is included in the original price. This separate and additional cost distinguishes a service contract from a warranty.

Before deciding whether to buy an auto service contract, find out who backs the service contract? It may be the manufacturer, dealer, or an independent company. Many service contracts sold by dealers are handled by independent companies called administrators. Administrators act as claims adjusters, authorizing the payment of claims to any dealers under the contract.

Costs will vary based on your cars’ model, make, and condition (new or used) along with the depth of the coverage, and the length of the contract. Ask about deductibles and specifically what types of repairs will be covered. Few auto service contracts cover all repairs. Watch out for absolute exclusions that deny coverage for any reasons. For instance, if the contract specifies that only “mechanical breakdowns” will be covered, problems caused by “normal wear and tear” may be excluded.

Find out how claims are processed. Find out if you will need prior authorization from the contract provider for any repair work or towing services. Ask how long it will take to obtain authorization and whether you can get authorization outside of normal business hours. Under the contract, you may have to follow all the manufacturer’s recommendations for routine maintenance, such as oil and spark plug changes. Failure to do so could void the contract. To prove you have maintained the car properly, keep detailed records, including receipts. Find out if the contract prohibits you from taking the car to an independent station for routine maintenance or performing the work yourself. The contract may specify that the selling dealer is the only authorized facility for servicing the car.

Make sure you read and thoroughly understand the agreement and check that all verbal promises have been included. Do not sign a contract with blank spaces that could be altered or changed. Finally, once the contract is signed, keep a copy of it for your records.