Warranties and Service Contracts

What warranties cover and limitations of service contracts.

All new cars sold in the United States come with written manufacturer's warranties, as well as implied warranties provided for by state law. Under the Federal Magnuson? Moss Act, automobile warranties must be in legible type and in language that the ordinary person can understand. A manufacturer's warranty must indicate what parts of the automobile are covered, which parts are not covered, and the manner in which warranty claims can be made.

At a minimum, most automobile manufacturers offer full warranty coverage for 12 months or 12,000 miles, whichever comes first. During this period, the manufacturer agrees to make any needed repairs that are the result of defects in materials or workmanship. The manufacturer is not required to replace items which wear out as the result of normal use, such as brake pads or windshield wiper blades. Tires are warranted separately by their manufacturer.

In addition to the basic warranty, most automobile manufacturers also provide extended warranties for the car's power train. Generally, the power train is defined as the car's engine, transmission, and front, rear, or four-wheel drive systems. Some of these warranties may last up to seven years or 70,000 miles, but they may also require the car owner to pay a deductible for each repair made. You can ask for a copy of the auto manufacturer's warranty before you make your purchase. Be sure you understand all of its terms, and don't rely on the oral promises of a salesman that are in contradiction of the written warranty.

Many auto dealers now offer a variety of extended service plans, under which a new or used car purchaser can protect against major repair bills beyond the life of the manufacturer's warranty. Basically, these plans require the purchaser to pay several hundred dollars for coverage, and also to bear the cost of a deductible amount each time a repair is made.

Before purchasing one of these extended service plans, you should know that many of them contain a great number of exclusions which in effect make them nearly worthless. For example, most service contracts exclude coverage for damage due to "owner abuse." Some service contract companies use this provision to exclude just about any claim made, and the burden of proving that the defect was not the result of abuse is on you. And a service contract purchased from a dealership may become worthless if the dealership should go out of business, unless it is backed by an automobile manufacturer or a major insurance company.