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Auto Service Contract/Extended Warranty

According to the Federal Trade Commission, 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 after the purchase of a vehicle and bears a separate cost. In comparison, a warranty comes with a new and, in some instances, a used car, and is included in the vehicle's price.

To avoid unwanted calls, consumers are reminded that they may register on the FTC's "Do Not Call" list by visiting www.donotcall.gov. According to the FTC, the registry takes 31 days to take affect. In the meantime, BBB - Greater Maryland urges consumers to ask the following questions before they commit to the purchase of an extended auto service contract:

* What's the cost of the auto service contract? The price of the service contract is based on the car make, model, condition, depth of coverage and length of contract. The cost of the service contract can range from several hundred dollars to more than $2,000.

* Is there a deductible? And, if so, how much is it? Is the deduction required for every instance of service or repair?

* What is covered and not covered? Few auto service contracts cover all repairs. Watch out for absolute exclusions that deny coverage for any reasons. For example, if the contract specifies that only "mechanical breakdowns" will be covered, problems caused by "normal wear and tear" may be excluded.

* Where are claims handled? Ask what service dealers or repair centers you will be able to take the car to for repairs. Find out if you will need prior authorization for any repair work or towing service, and if so, how to obtain authorization - how long it will take to do so - and can you obtain authorization outside of normal business hours?

* What are your responsibilities? Under the contract, you may have to follow certain recommendations on maintenance of the car. Make sure to keep all documentation of any service on the vehicle. This way you can prove you have maintained the car properly.

* What is the length of the service contract? If the service contract lasts longer than you expect to own the car, find out if it can be transferred when you sell the car, whether there's a fee, or if a shorter contract is available.


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As a matter of policy, BBB does not endorse any product, service or business.

BBB Business Reviews are provided solely to assist you in exercising your own best judgment. Information in this BBB Business Review is believed reliable but not guaranteed as to accuracy.

BBB Business Reviews generally cover a three-year reporting period. BBB Business Reviews are subject to change at any time.