Five Questions Every Consumer Should Ask Before Purchasing an Extended Vehicle Warranty

Insurer recommends investigating reputation and ease of use to avoid fraud, rip-offs

SOUTHFIELD, Mich., July 23, 2009; According to a recent AutoPacific survey, more Americans are waiting longer to purchase new vehicles, keeping older vehicles on the road longer and increasing the likelihood they may have to contend with unexpected, costly repairs that fall outside of a manufacturer's warranty. GMAC Insurance today offered five questions consumers should ask when considering a vehicle service contract (VSC), sometimes called an extended warranty, which may help defray these vehicle expenses.

"During these challenging economic times, everyone is looking for ways to protect their budget," stated Tom Callahan, executive vice president of GMAC Insurance's Dealer Products and Services group. "In many cases, consumers are holding off on big purchases, like new vehicles. But, because the risk of major component failures increases with vehicle age, it can expose consumers to unexpected costs."

VSCs may help by covering parts, labor and other expenses associated with vehicle repairs. However, not all VSCs are the same, and it is important for consumers to do their homework.

"Purchasing a VSC can be significant investment, and every consumer needs to consider his or her own unique circumstances and expectations," explained Callahan. "A VSC with a reputable company can more than make up for its cost by covering future vehicle expenses, as well as providing consumers with peace of mind."

Top Five VSC Questions Every Consumer Should Ask

GMAC Insurance, which has been offering VSCs for more than 35 years, recommends answering these five questions before purchasing a contract.

  1. Is the contract easy to understand?  Read the coverage terms before you
     purchase the contract -- the scope of coverage should be clearly stated
     in the body of the contract.
  2. Do the coverage terms and limits make sense for your personal
     situation?  Every situation is unique, but consumers should consider
     how long they plan to keep their vehicles and their typical annual
     mileage; the amount of the deductible in event of loss; whether
     coverage includes normal wear and tear; and the cancellation and refund
     terms. Ask yourself if the price seems reasonable for the level of
     coverage you are getting. If it seems too good to be true, it probably
     is.
  3. Does the contract offer additional benefits? Some VSCs will cover
     repair expenses that go beyond just parts and labor by offering rental
     car coverage or reimbursing costs due to trip interruption.
  4. Who is providing the coverage? As a general rule, a VSC should provide
     the right to make a claim against a licensed insurance company that
     maintains proper financial reserves to pay those claims. Make sure you
     are dealing with a nationally recognized company that has demonstrated
     a long-term commitment to the product and their customers.

  5. Is it easy to receive coverage benefits?  Is the repair process simple
     and convenient? Reputable VSC companies try to make the process of both
     purchasing and servicing the contract as easy for the consumer as
     possible. Consumers should investigate how claims are paid and if there
     are limitations on where vehicles can be repaired.

  About GMAC Insurance

Established in 1925, GMAC Insurance now offers a wide range of products to meet the needs of retail consumers, dealers and business partner, and is one of the nation's largest providers of vehicle service contracts. GMAC Insurance is a wholly owned subsidiary of GMAC Financial Services, a bank holding company with 15 million customers worldwide. As a global, independent financial services institution, GMAC's diversified business operations include automotive finance, mortgage operations, insurance, commercial finance and online banking. As of March 31, 2009, the company had approximately $180 billion in assets.