Many misconceptions surround auto service contracts – causing most car owners to be skeptical about adding them to their vehicle purchase. However, consumers who believe a service contract to be entirely unnecessary are only leaving themselves financially vulnerable in the long run. Read on to understand how auto service contract myths can be busted.

For the last five years, most people spent up to $2,000 on car repairs. It’s a considerable out-of-pocket expense that car owners can avoid if they have auto service contract coverage.

It’s essential to set the record straight once and for all. This way, you’ll be able to help your customers in clearing the misunderstandings surrounding this type of contract. With auto service contract myths busted, you’ll be able to see the real truth and explain to your customers how to avoid being helpless to unexpected car repairs.

Debunking Auto Service Contract Myths

A vehicle service contract is easier to understand without the prevalent myths around it. By eradicating these confusing inaccuracies, you’ll be able to thoroughly and efficiently relay to your customers what these service contracts are. In doing so, you can make them see the value of buying it.

Myth #1: Auto Service Contracts and Insurance Covers the Same Things

Most drivers assume they won’t need an auto service contract anymore if they already have insurance coverage. They perceive the two as the same because they both protect car owners from the same things.

However, they are far from redundant. While both auto service contracts and insurance help in shouldering auto repair costs, each apply to different circumstances.

Every vehicle purchase legally requires the buyer to get auto insurance – protecting vehicles in the event of an accident. Whether the car owner is at fault or not, insurance will help cover damages from accidents, including theft and natural catastrophes like hurricanes. However, car insurance cannot help in cases where a vehicle breaks down outside of an accidental situation.

On the other hand, a vehicle service contract can provide coverage if the cause of the issue doesn’t involve accidents. Car parts breaking down due to mechanical failure can happen depending on the driving conditions. If your customers have a service contract, they will only shell out a small deductible amount to cover repairs.

Myth #2: Auto Service Contracts and Extended Warranties are Similar

The Department of Justice asserts a warranty as the car manufacturer’s statement declaring their brand new vehicle is free from defects. In case something breaks down within a specified period, the manufacturer will repair the car for free.

The misconception about service contracts and warranties being the same comes from the way they provide protection. These two will both cover unexpected mechanical repairs outside of an accident. However, that’s where the similarities end.

Here are some of the disparities between these two:

  • The manufacturer’s warranty already comes with every new car purchase. On the other hand, a service contract is not automatically part of the financing.
  • Customers who avail of an auto service contract will have more choices of approved repair shops. If they only rely on the warranty, they have limited options – either send their car to the dealership or the manufacturer’s authorized service center for repair.
  • A manufacturer’s warranty only applies to new vehicle purchases.
  • As long as you constantly pay your premium, your auto service contract will remain active. On the other hand, the warranty period usually only has three years or 36,000 miles coverage.

Myth #3: Auto Service Contracts are Costly and Unnecessary

Most drivers shy away from getting an auto service contract because they wrongly tag it as expensive. On average, it usually only costs between $350 to $700 every year. That’s actually cheaper than a yearly supply of morning coffee from Starbucks.

It’s crucial to help new car owners realize the value of service contracts. You can let them grasp the amount they might have to pay if their car needs repairs past its warranty period.

Debunk the myth further by letting your customers know how flexible the payment terms are. You can also mention how it’s better than bearing the total amount of unexpected repair costs. Most policies only require small monthly payments, while others will have the driver pay a deductible when making a claim.

Costs are generally negotiable depending on how much the owner can pay and the coverage.  Additionally, car owners have several options to include in the contract, affecting the amount.

Myth #4: Auto Service Contracts Cover Every Vehicle Expense

Some people purchase a service contract expecting it to cover all parts and repair expenses. However, it depends on the type of policy bought. It’s important to let your buyers know the policy limitations, helping them understand that even the most expensive package does not cover everything.

Bumper-to-bumper protection may provide the best coverage, including car electronics, but it also has restrictions. The list of exclusions in the contract includes things like voiding coverage for any car modification, intentionally damaging the vehicle, or avoiding needed repairs.

Myth #5: Auto Service Contracts are a Scam

Contrary to this misconception, auto service contracts are lifesavers and can prevent a household from incurring car debt. Most buyers believe the lie because of bad experiences they or someone they know had in the past.

Irresponsible dealers who focus on making a sale without educating their customers can further aggravate and add some truth to the misconception. If no one explains to buyers the intricacies of the contract – including what they may or they may not claim – they may end up feeling scammed by the dealer.

An excellent F&I manager can help clear away this myth. The skilled manager can explain to your customers the benefits of the contract in detail and the possible consequences of not having one when the vehicle breaks down unexpectedly.

Help Buyers be Open to Vehicle Service Contract

Use these myth-busting tips to help your customers understand the value of purchasing an auto service contract. With more car owners starting to see the truth behind this add-on policy, it will become easier to sell them the contract in their future purchases.

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