Warranty or VSC: Which Do You Have and Why Does It Matter?
You shopped, did your homework, test drove a few, crunched some numbers, put on your game face at the dealership, handled the sales manager and the F&I guy, and took delivery of that vehicle. Congratulations. I hope you have (or had) some protection at the time of your purchase. The protection I am speaking of is in the form of either a warranty or vehicle service contract—two different agreements. Which do you have and what does it matter? Hmm….let’s talk for a minute and provide some general rules for each and illustrate a few significant differences.
A warranty is provided by the vehicle’s manufacturer when you purchase a new vehicle. New vehicle warranties cover the entire vehicle: bumper-to-bumper and all points in between. Usually the powertrain (comprised of the engine, drivetrain, and transmission–key components of any vehicle) warranty is of a longer duration than the bumper-to-bumper warranty. Warranty repairs must be performed by dealers franchised by the manufacturer. No deductibles or copayments are due from the consumer; the manufacturer covers the cost 100%. There is federal law governing warranties and every state has additional provisions protecting the consumer. Most states have law specifying the terms and conditions of when a new vehicle can be deemed a “lemon” thereby affording the consumer the right to refuse to allow further repairs and instead exercise certain rights and remedies including vehicle replacement or a refund.
A vehicle service contract (VSC) is sometimes called an extended warranty but this would be incorrect terminology. A VSC is not considered a warranty for purposes of federal law. VSCs are offered on some used vehicles if they are within a certain age or mileage and often a dealer offering a VSC will have placed the vehicle through a multi-point checkup. Used vehicle dealers often “broker” or arrange for VSCs on vehicles purchased by their customers. Most VSCs tend to be financially backed by administrators or insurance companies. In essence, VSCs are promises to perform (or pay for) certain repairs or services which means they cover fewer vehicle components. Some VSCs are riddled with exceptions and exclusions. VSCs require the vehicle owner to pay a deductible but the owner can have the vehicle serviced and repaired at any reputable repair facility.
In purchasing a used vehicle it is a good idea to seriously consider purchasing a vehicle service contract but do your homework here too. First determine if you need a vehicle service contract. Then ask the dealer for a copy of the vehicle service contract so you can review it and determine the extent of coverage you will receive. And shop around as vehicle service contracts are offered by many companies and organizations including American Automobile Association (AAA).
If a vehicle seller enters into a service contract with a consumer within 90 days of the sale the buyer automatically gets the benefit of implied warranties under federal and state law. “Enters into”, however, does not include the common scenario where Joe’s Auto Sales suggests you obtain a vehicle service with BigTime Fidelity Auto Services and has you complete the paperwork which clearly states the service contract is between you and BigTime. In this common scenario Joe’s Auto Sales delivers the vehicle to you “as is” with no warranty; your only vehicle protection is the service contract you purchased from BigTime. But…. there can be shades of gray depending on whether all repairs must be performed by the seller… or whether the dealer is contractually obligated to pay for repairs…or possible other key factors. Sometimes the gray can be painted into the creation of implied warranties by the seller to the consumer–even if the seller did not intend such.
Confused? I sure hope not. Educated? I sure hope so. If you purchase a vehicle, obtain either a warranty or vehicle service contract, and have ongoing problems with your vehicle you should seek a consultation with an experienced attorney to determine your options. Contact the O’Neal Law Office today.