We get asked a lot about our auto service contracts, commonly referred to as “warranties.” The most asked questions are, “Are they worth the price?” and “How does it work?” Let’s start with the price. Prices can vary widely from auto to auto. Usually the older the auto, the higher the service contract cost. Mileage is also a big issue when pricing service contracts. The higher the mileage, the costlier the service contract. So, keep that in mind right off the start when pricing service contracts or buying a pre-owned vehicle.
It has been my experience over the last several years that the service contracts that we sell usually run about $20 to $40 per payment. The higher payment leans toward an older vehicle with higher mileage. Total cost has been around $1,400 to $1,800 for an average 24 month or 24,000-mile service contract.
I typically favor purchasing the service contract on pre-owned autos. Not just to sell one to make profit (we only have a small margin built into the price). No one can be sure about, “what’s getting ready to break, quit or need replacing” on a used vehicle. With the cost of parts and labor-intensive repairs, the bill can get sky high quicker than a meteor rocket on the 4th of July. One repair can set you back and even break your bank account if you’re paying out of pocket. If you can’t afford the repair, you’re stuck with possibly an undriveable auto, driving something that may be dangerous and putting your life and others’ lives at risk. Also, driving something that needs repairs only causes other things to go wrong, costing you even more down the road. Pun intended.
On to the “how it works.” Be sure to read your coverages and know your deductible if there is one. Also, know your aggregate. Each contract is only going to pay out so much according to your vehicle’s worth. The contract provider states all of this in the service contract. Be sure and read it – at least the important parts, like the deductible and aggregate. Also, know your contract provider’s contact numbers and email address. I suggest calling their customer service number before you buy. That way you can see how quickly and well the customer service responds. You can also ask them questions about their products. This will give you great insight as to how the company is ran daily.
Remember, your vehicle is an investment into your future. Take care of it. Keep it maintained and drive-able. That way your investment can pay you back with stress free driving, lower repair cost, better gas mileage and a longer life.
Now, to address the elephant in the room. If you’re a repair savvy person or have a family member that is, you might want to skip the additional cost of the service contract. Or, if you’re good at budgeting for repairs, skip it. For those of us that don’t have a mechanic in the family, it might be a good idea to add a service contract to your financing agreement. It’s a lot easier to pay in small increments now instead of risking it all on your vehicle running its full potential without any repairs what-so-ever (Please don’t!). All pre-owned autos will need something at some point. And that’s the bottom line.