Aftermarket Car Warranty
(Properly called a vehicle service contract or VSC when issued by anyone other than the manufacturer)
An aftermarket car warranty or VSC is an excellent investment that can protect you from the high costs of unexpected repairs.
An extended warranty or VSC is basically a service contract between you (the car owner) and the company providing the warranty. If your car needs a repair, the shop will call the extended warranty company for authorization and the work will be completed with little inconvenience or cost to you.
Many people think that they do not need to purchase an aftermarket warranty while the manufacturer's warranty is still in effect. Keep in mind, though, that the cost for coverage rises as the car ages and the mileage increases. However, once you purchase the coverage, your rate class will not change, so buying earlier will allow you to acquire long term coverage at the lowest possible rates.
Here is what I will cover in this article:
- Third Party vs. Manufacturer's Extended Warranty
- What Company Backs the Warranty?
- Choosing an Aftermarket Warranty or Vehicle Service Contract Company
- What To Look For In An Aftermarket Car Warranty
Third Party vs. Manufacturer's Extended Warranty:
There are two main types of extended warranties:
- Those offered by the car manufacturer
- And ones provided by third party companies, also called aftermarket extended warranties or VSC's.
Aftermarket extended warranties or VSC's offer many benefits for the consumer. They are often easier to use, less expensive, and include a broader range of coverage options than warranties offered by the manufacturer. A manufacturer's extended warranty is purchased from a authorized dealer and is basically a continuation of the original warranty. In this case, any covered repair work would have to be completed at a dealership. However, most third party warranties allow you to take your car to any certified repair facility, giving you much more flexibility. Also remember that many dealers choose not to sell the manufacturer's extened warranties and instead sell vehicle service contracts.
What Company Backs the Warranty?
VSC's or aftermarket car warranties may be less expensive, but it is important that you know the reputation of the company that stands behind your agreement. In other words, make sure your extended warranty administrator is backed by a quality insurance company.
The administrator is the company that authorizes payment for any needed repair work, and it is the job of the insurance company to make sure that the administrator (or third party) is handling incoming claims properly. They guarantee that the terms of your agreement will be honored, even if the administrator is unable to pay. With the number of dealerships and third party businesses shutting down, it is vital to have a reputable insurance company backing your policy, or you could find yourself in an unfortunate situation when it comes to filing a claim.
In some cases, the administrator and the insurer underwriting the policy are the same company. This can be beneficial to the consumer since there is a lower risk of the administrator failing to meet their financial obligations. Also, buying the contract directly from an insurance company that owns the administrator often means lower prices.
Choosing an Aftermarket Warranty or Vehicle Service Contract Company:
When choosing an aftermarket warranty company or vehicle service contract company, there are a few things that you should consider:
- The company should have a long history of providing extended mechanical breakdown protection. Find out how long the company has been in business and make sure they are financially sound. Remember, the longer the history, the less likely they will be to go out of business. You want to choose the warranty provider with the lowest risk so you have the peace of mind knowing they will be able to honor the agreement when you need it.
- Check out the reputation of the company. Make sure it is a legitimate business with high scores from major rating services. The company should have an "A" or better rating from both the Better Business Bureau and A.M. Best. It only takes a few minutes to visit A.M. Best's website to check the financial stability and reputation of the insurance company or third party provider that you are considering. Doing your homework could save you a lot of money and hassle in the long run.
- The insurer and the administrator should be the same company. VSC's are backed by an insurance company, so it is often safer to buy directly from an insurance company, such as Mercury Insurance, than to deal with a separate administrator.
What To Look For In An Aftermarket Car Warranty:
To ensure that you get the best coverage for your needs, it is helpful to know what to look for in an extended warranty contract.
- Determine the type of coverage you want. Are you looking for an inclusive bumper-to-bumper contract or do you want a policy that focuses on major and costly parts such as the engine or transmission? Knowing what you want is the first step in making sure you get the best protection possible.
- Who administers the coverage? As already mentioned, check out the reputation of the extended warranty and VSC administrators as well as the underwriting insurance company.
- Know the terms of coverage. Depending on the company, there could be several levels of coverage options, and it is important to know what is included in each level. Clarify all 'definitions' (for phrases such as "wear and tear", "bumper to bumper" etc.), check for exclusions, and read the fine print. You can even request copies of the contracts that you are considering so that you can compare the terms before making your final decision.
- What are the repair facility options? Do you have to take your vehicle to the dealership or can you have repairs completed at the service facility of your choice? The better aftermarket warranty and VSC companies allow for more choices, making it more convenient for you.
- How are the claims handled? Do you have to pay the money up front and then wait to be reimbursed? Look for a company that handles all aspects of the claim, including paying the repair facility. You want to find coverage that will offer the least amount of inconvenience or expense.
- What is the deductible? Ask about the amount and if it is applied per visit or per repair. This could make a difference in your out-of-pocket expenses, especially if you are having several repairs completed at once.
- Is the contract transferable? An extended warranty or VSC is very appealing to prospective buyers and will increase the re-sale value of your car, so make sure the policy can be transferred to a new owner.
When purchasing an aftermarket car warranty or VSC, you want to find the coverage that best fits your needs. An extended warranty or VSC is supposed to provide you with peace of mind and security knowing that you are protected from the expense and inconvenience of mechanical failures. Choosing a reputable insurance company will make sure that all your claims are handled properly and efficiently. Yes, mechanical breakdowns are an interruption to your everyday life, but with the right company backing you, repairs will be completed quickly and professionally.
Mercury's Mechanical Breakdown Protection (MBP) offers a variety of plans to suit virtually every customer. Their impeccable reputation, coupled with great features such as low rates, trip interruption insurance, tire protection, and unlimited number of claims makes them one of the best companies in the business. And, since all coverage is transferable, it is definitely a worthwhile investment.
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