Guide to Auto service contracts

12 The Price — The price of a repair agreement depends mainly on the type of car, how many miles are on the car’s odometer when you buy the agreement, the kinds of repairs that the contract covers or does not cover, and the number of years or miles the agreement covers before it expires. Car dealers are allowed by law to make a profit on the sale of a VSC. They may charge you as much as you are willing to pay (and as much as the company financing your vehicle is willing to finance). By contrast, the CDI limits the price of MBI to what is considered fair and reasonable. MBI may only be sold by CDI-licensed insurance companies and CDI- licensed insurance agents. Agents who sell MBI receive a commission. Unlike VSCs, MBI legally may be bought and sold on the Internet, but only by an insurance company or agent licensed by the CDI. You can negotiate the price of a VSC with a dealer, just as you can negotiate the price of a car. However, you cannot negotiate the price of MBI. One way to effectively negotiate the price of a VSC is to also shop for MBI (only from a CDI- licensed insurance company) before you go to the dealer to buy your car. However, if you compare MBI with a VSC, be careful to compare coverages and exclusions, and not simply the price. The Duration — All repair agreements expire after a certain length of time or number of miles. The duration typically ranges from one year/ twelve thousand miles to ten years/one-hundred thousand miles. What is Covered — Different repair agreements provide different coverages. For example, so-called “power train coverage” might only cover the major components of the vehicle, such as the engine, transmission and drivetrain. A more expensive agreement with broader coverage will cover the engine, transmission, drivetrain and other major parts, such as the suspension, brakes, air conditioner and steering.