The Regulated Industries Unit of the Iowa Securities Bureau has been assigned administrative responsibility for Iowa Code Chapter 516E, the Motor Vehicle Service Contract statute. Therefore, we have prepared the following information for your benefit.
This publication is an attempt to provide you with information that you need to make an informed decision when considering the purchase of a motor vehicle service contract. The contracts are marketed by automobile manufacturers, by auto dealers and by after-market suppliers. The purpose of these contracts is to provide mechanical breakdown protection well beyond the expiration of the factory warranty. The purchase of a service contract best suited to your needs requires careful study and consideration.
Talk to any auto dealer. Most auto dealers will explain the merits of, and offer you the opportunity to buy, a service contract at the same time you purchase your vehicle or within a limited time following that purchase. Many of these contracts are provided by the manufacturer of the vehicle you have purchased. Most service contract companies offer a wide range of options available within each of their contracts. As an example, some of the contracts offer a choice as to the number of miles covered by the agreement. Contracts may protect your vehicle for 20,000, 50,000, 75,000, 100,000 miles or more. Some contracts cover engine components only. Other contracts offer bumper to bumper coverag and some may be structured to provide the coverage important to you.
Yes. The factory warranty on your new vehicle provides protection for approximately 35,000 miles. At this point the factory warranty expires and the service contract becomes effective. Even though the protection provided by the service contract begins as of the date of purchase of the vehicle, little coverage is available until the factory warranty has expired. For example, if you have purchased a contract that offers 100,000 miles of protection, the service contract only covers your vehicle from 35,000 to 100,000 miles (65,000 miles of protection).
If you are planning to keep your new vehicle for several years, a motor vehicle service contract may be a wise decision. If you are planning to trade vehicles frequently, you may not need a service contract. If you decide that the service contract may be beneficial to you, the following comments may be helpful.
If you have questions or complaints about the motor vehicle service contract, contact:
Better Business Bureau
505 - 5th Avenue
Des Moines, Iowa 50309