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Acura
Pauly
Acura
2699 Skokie Valley Road
Highland Park,
IL
847-433-8200
Contact: Troy Meeke or Mike Van
Herzeele |
$200 |
BMW
Courtesy Motors Auto Center
2520 Cohasset Road
Chico, CA
530-230-3154
Contact: Lisa Lehrbaum |
$200 |
Dodge-Chrysler-Jeep
Waldorf Dodge
2440 Crain
Highway
Waldorf, MD
240-427-1376
Contact: Lloyd Foulds or Hans Gibbs |
$50 |
Ford
Academy Ford Sales
13401 Baltimore Washington
Blvd.
Laurel, MD
301-419-2700
Contact: Dale Hill or Donny Hannum |
$25 |
General Motors -
(excludes Saab & Hummer)
Ourisman Wheaton Plaza
11180 Veirs Mill Road
Wheaton, MD
301-946-0001
Contact: Jim Gantz |
$50 |
Honda
Ourisman Honda of Bethesda
4800 Bethesda Ave.
Bethesda, MD
301-656-1000 Ext:232
Contact: Rich Kandel |
$199 |
Hyundai
Manfredi Hyundai
1257 Hylan Boulevard
Staten
Island, NY
718-727-2277
Contact: Mike Onions |
$100 |
Lexus
Len Stoler Lexus
11311 Reisterstown Road
Owings
Mills, MD
410-998-3482
Contact: Kathleen Walsh |
$100 |
Mercedes
Courtesy Motors Auto Ctr.
2520 Cohasset
Road
Chico, CA
530-230-3154
Contact: Lisa Lehrbaum |
$200 |
Nissan
VOB Nissan
11605 Old Georgetown Rd
Rockville,
MD
301-770-6100
Contact: Harold Shelby |
$50 |
Subaru
Roto Subaru
1555 E. Rand Road
Arlington Heights,
IL
847-255-5700 Ext:290
Contact: Joe Gingras |
$25 |
Toyota
Darcars Toyota
12210 Cherry Hill Road
Silver
Spring, MD 20904
301-622-0300
Contact: Jam Khan |
$100 |
Volvo
Courtesy Motors Auto Ctr.
2520 Cohasset Road
Chico, CA
530-230-3154
Contact: Lisa Lehrbaum |
$200 |
Fidelity - All Vehicles
(except Maybach, Ford GT, and
commercial vehicles)
Ourisman Wheaton
Plaza
11180 Veirs Mill Road
Wheaton,
MD
301-946-0001
Contact: Scott Barnaby |
$50 |
Why Bother?
Extended service contracts for automobiles produce big
profits for the dealers that sell them and the extended service
contract companies that back them. On a contract for which you pay
$1,000, the average payout for claims might be less than $250, with
the rest going to administrative costs and profit.
Many new cars are very reliable, so there are few
service claims. Also, many cars now carry long manufacturer
warranties, so many service problems are covered by the warranty,
leaving little to be covered by the extended service
contract.
But millions of new car buyers each year buy these
contracts. What you get, the salesperson will argue, is “peace of
mind.”
If you decide you want to buy a service contract, this
article will probably save you at least $150. But first you must
decide whether one of these contracts makes sense for you.
You don’t have to rush your decision. Most service
contract companies allow you to sign up long after you have
purchased your new car. With most, you can delay the decision for at
least the lesser of one year or 12,000 miles, and in many cases you
can wait until just before your new car warranty
expires.
Our general view on service contracts, which are
simply insurance against repair bills, is the same as our view on
other types of insurance. Don’t insure unless a possible loss—a
large repair bill—would be very disruptive to your life. Why pay
administrative costs and profits to an insurance company if you
could simply “self-insure” and pay any unexpected bills out of your
own pocket?
The case for getting an extended service contract is
strengthened somewhat if—
- Your car has a lot of options and accessories—power seats, a
CD changer, performance packages—that might break down and that
would be covered by a service contract.
- Your car has needed a surprisingly large number of repairs
during the early months of your ownership.
- You plan to keep the car at least six or seven years—through
the duration of the contract. With most contracts, if you sell or
trade your car to a dealer, you get only a pro rata refund for the
period remaining on the contract. For example, if you have a
six-year contract and sell the car to a dealer after three years,
you get only half the contract price back. But most of the actual
value of a contract is in later years—after the new car warranty
has expired and when the car is older and more likely to need
repairs.
Choosing a Contract
If you decide to buy an extended service contract, you
have many options. You don’t have to buy your extended service
contract where you buy your car or where you plan to have it
serviced. For example, you can buy a Ford at one dealer, buy a
Ford-sponsored service contract at another Ford dealer, and have the
car serviced at any Ford dealer in the country.
Your first step in buying a service contract is to
review the provisions of available contracts to see exactly what is
covered. You can get brochures describing contracts from local
dealers or by calling dealers listed on the table below. The Federal
Trade Commission urges you to review a copy of the actual contract
you will receive rather than just a brochure, but many manufacturers
don’t give their dealers sample contracts (you get a contract in the
mail after you sign up); so it may be difficult to see one to
review.
You’ll find substantial variations in what contracts
cover. Almost all contracts exclude from coverage maintenance and
wear items, ranging from brake parts to exhaust system components to
air filters. And many contracts exclude—or fail to include—many
additional items, including electrical devices like power windows
and radios, interior trim, gauges, and even air-conditioning
systems. Some contracts cover only a specified list of items
and you’ll probably have a hard time judging whether important items
are left off the list. You’re better off with a contract that covers
everything except a specified list of items.
Some contracts cover the cost of towing and a rental
car but others do not. Some contracts cover parts but not all the
labor necessary for diagnosis and repair. And most contracts require
you to pay a “deductible” amount for each repair—in some cases, as
much as $100—before the service contract company pays
anything.
Be sure to check where you can get repairs done—at the
selling dealer only, at any dealer of your make of car, at any new
car dealer, or at your choice of new car dealer or independent
repair shop. Since consumers tend to be more satisfied with repairs
at independent shops than with repairs at new car dealers, it’s good
to have the option of using an independent shop.
Also, check how the shop will be paid. Under some
contracts, the shop simply bills the contract company; under others,
you must pay the shop, then seek reimbursement—often
long-delayed—from the contract company. Even if a service contract
company says shops can bill it directly, check with repair shops you
might use to be sure they will in fact bill the contract company;
most independent shops have long since decided not to put up with
the hassle of collecting from service contract companies. Shops will
be more willing to deal with contract companies that allow the shop
simply to charge the repairs to the contract company’s Visa or
MasterCard.
Finally, find out the name of the company that backs
the service contract and be sure this company is financially sound.
Many of these companies have gone out of business in recent years,
rendering their contracts worthless. You are probably safest with a
service contract backed by an auto manufacturer like Ford or General
Motors.
Keep in mind that the same contract sponsor—Ford, for
example—usually offers several different contract options. The more
you pay, the more coverage you get.
Choosing a Dealer
At least as important as choosing a good contract is
finding a dealer that will sell it to you at a good price. Dealers
make a big markup above what they pay for these contracts. One study
found that among a sample of contracts it examined, backed by a
major manufacturer, 92 percent of the customers paid at least $200
above dealer cost, 24 percent paid at least $600 above dealer cost,
and three percent paid at least $900 above dealer cost.
We have done the work for you to cut dealer markups—in
some cases to $50 or less—for many types of cars. We invited dealers
around the country to bid competitively to be listed on the table
below. We conducted this bidding process for a sample of dealers
that sell each of the major manufacturer-sponsored contracts and
also for dealers who sell “umbrella” policies that will cover any
make of vehicle. While many dealers weren’t interested in selling
contracts below the heavily marked-up prices they usually receive,
some recognized that any business they get from informed
CHECKBOOK readers is a bonus.
The dealers listed on the table below offered the
lowest markup commitments. Regardless of where you live, you can
call the listed dealership and arrange by phone or by mail to
purchase a service contract. The dealers have agreed to sell you a
contract at the specified markup above dealer cost. The dealers have
agreed to tell you the dealer cost—what the dealer pays the
manufacturer or administrator—for a contract for the type of car and
coverage you want. When you call, explain that you want the markup
the dealer committed to for listing with “Consumers’
CHECKBOOK.” We’d like to receive a copy of the invoice for your
contract to help us monitor this program.
Dealership owners and policies change. If you find you
can’t get the promised bargain at the listed dealership, you can
call us and ask for up-to-date names of the dealers with the best
quotes for your type of car. This list will also be kept up-to-date
on our website at http://www.checkbook.org/.
We have listed a dealership finance manager as contact
person for each dealer. But these individuals may change jobs. So
ask for the finance office, explain what you want, and speak with
someone else if the named person no longer works there.
The best way to complete your service contract
purchase is by phone, using a credit
card. |
