Why do buyers of new motor vehicles need a Service Contract when the manufacturer provides a warranty?
Motor vehicle Service Contracts pick up where a manufacturer’s warranty leaves off. They provide coverage for components and systems not covered during the warranty’s duration and when the warranty ends. In uncertain economic times many consumers keep their cars longer and take out longer-term loans (5, 6 and 7-year loans are now available) to finance their purchase. A typical manufacturer’s limited warranty generally runs for 3 years or 36,000 miles. After, repairs can be expensive, for instance, it can cost roughly $4,000 to replace a vehicle’s integrated computer unit or repair the air conditioner. In addition, manufacturer’s warranties are based upon defects in material and workmanship and do not cover normal wear-and-tear. Most 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, depending on the terms of the contract.
