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Auto Protection Plan – Facts For Consumers Part 1

If you have decided to get an auto protection plan, you should find out if the plan that you are about to purchase contains any warranty coverage. We recommend that you have a look at the warranty offered by the manufacturer of the car before making a purchase. If you buy a new car it will come with a manufacturer’s warranty, which in most cases offers coverage for at least one year or 12,000 miles (whichever comes first). Depending on where you buy a used car from, some dealers also offer warranty for pre-owned vehicles.

Some people decide to purchase a “demo” model – a vehicle that hasn’t been sold to a retail customer but it has been driven for other purposes other than a test drive. If this is your case, find out details about when the coverage starts and ends. Figure out if the warranty has started when the dealer first put the car in service or when you bought it.

A vehicle protection plan that is sold by a car dealer can be handled by an independent company called an administrator. These administrators act as claims adjusters and they authorize the payment of claims to the dealers under the contract. This means that you will have to deal with the administrator if you have a dispute over whether a claim has to be paid.

If that administrator retires from the business, in many cases the dealership will still be legally obligated to perform under the contract. The situation is valid also the other way around, because if a dealer goes out of business, the administrator will have to fulfill the contract’s terms.

It is advisable that you learn about the reputation of both the dealer and the administrator by asking for references and contacting your local/state consumer protection office, local Better Business Bureau, state Department of Motor Vehicles or you can check the local automobile dealers association in order to verify if they have public information about the companies. You should find out since when the dealer and the administrator have been in this business and try to figure out if they have enough financial resources to pay for their contractual obligations.

You should know that some of the dealer associations and individual car dealers have funds set aside or they buy insurance in order to cover any possible future claims. We recommend that you find out if the auto protection plan that you are about to sign is underwritten by an insurance company. In some states in the U.S. this is required by the law. If this contract is backed by an insurance firm, call the State Insurance Commission for asking about the company’s solvency and if any complaints have been filled.

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