What Is An Auto Repair Agreement And Why Do You Need It?

Auto Repair Agreements are essential for safeguarding against unexpected vehicle repair expenses, offering peace of mind and financial protection. At AUTO-REPAIR-TRAINING.EDU.VN, we empower you with the knowledge to navigate these agreements confidently, ensuring you make informed decisions about your vehicle’s coverage. Explore our comprehensive resources for auto repair training and garage startup guides, complete with ASE certification insights, business plan templates, and step-by-step tutorials.

1. Understanding Auto Repair Agreements

What exactly is an auto repair agreement, and how does it differ from a warranty?

An auto repair agreement, also known as a Vehicle Service Contract (VSC), is a contract that covers the cost of certain vehicle repairs after the manufacturer’s warranty expires. Unlike a warranty, which is included in the price of a new vehicle and covers defects in materials or workmanship, an auto repair agreement is an optional, purchased contract. According to the California Department of Insurance, these agreements obligate a company (the obligor) to pay for covered repairs to your vehicle. The key differences and aspects include:

• Obligor: The company legally responsible for paying for covered repairs. This could be a Vehicle Service Contract Provider (VSCP), a car dealer, or an insurance company in the case of Mechanical Breakdown Insurance (MBI).
• Coverage: Auto repair agreements cover specific repairs outlined in the contract. These can range from powertrain coverage (engine, transmission, drivetrain) to more comprehensive coverage that includes suspension, brakes, air conditioning, and steering.
• Exclusions: All agreements have exclusions—items or conditions not covered. Common exclusions include wear and tear, lack of maintenance, overheating, or modifications to the vehicle.
• Duration: Agreements are valid for a specified time or mileage.
• Cost: Unlike warranties, auto repair agreements have a separate cost. The price depends on the vehicle type, mileage, coverage, and duration of the agreement.
• Backup Insurance: To protect consumers, many agreements are backed by insurance companies that cover claims if the obligor goes out of business.

2. Who Needs An Auto Repair Agreement?

Who benefits most from having an auto repair agreement, and is it worth the investment?

Auto repair agreements are beneficial for vehicle owners who want to protect themselves from unexpected repair costs, especially as vehicles age and become more prone to breakdowns. Whether it’s a VSC, dealer-obligor contract, or MBI, the value lies in the financial security and peace of mind it offers. Consider the following scenarios:

• Owners of Older Vehicles: As vehicles age, the likelihood of mechanical failures increases. An auto repair agreement can cover costly repairs that may arise, providing a predictable expense instead of a large, unexpected bill.
• Individuals with Limited Savings: For those who may not have substantial savings to cover significant car repairs, an agreement offers a way to budget for potential issues.
• People Who Rely Heavily on Their Vehicle: If you depend on your vehicle for work or daily activities, the cost of repairs and potential downtime can be a major inconvenience. An agreement can help ensure quicker repairs and possibly provide rental car coverage.
• Those Who Prefer Predictable Expenses: Some people prefer to pay a fixed amount for coverage rather than risk unpredictable repair bills.
• Owners of Vehicles with Known Issues: If a particular make or model has a history of specific problems, an agreement can provide protection against those known risks.
• Individuals Planning to Keep Their Car for a Long Time: If you intend to keep your vehicle beyond the manufacturer’s warranty, an agreement can extend coverage and reduce long-term ownership costs.

According to a 2023 report by AAA, the average cost of vehicle repairs ranges from $500 to $600 per incident, but major repairs can easily exceed $2,000 or more. An auto repair agreement can help mitigate these costs, particularly for those who anticipate needing such services.

3. Types of Auto Repair Agreements

What are the different types of auto repair agreements available, and how do they compare?

There are three main types of auto repair agreements, each with a different obligor and distinct characteristics. According to the California Department of Insurance, understanding these differences is crucial for making an informed decision.

3.1. Vehicle Service Contract Provider (VSCP) VSCs

VSCPs are companies licensed by the state to sell VSCs. They are the most common type of obligor in California. The primary features include:

• Obligor: A licensed Vehicle Service Contract Provider (VSCP).
• Backup Insurance: VSCPs must have backup insurance to cover claims if the VSCP goes out of business or fails to pay. The name and address of the backup insurance company must be on the VSC.
• Regulation: VSCPs are regulated by state insurance departments, ensuring they meet financial and operational standards.
• Availability: Sold through car dealerships or, illegally, directly to consumers via phone or internet in some cases.
• Example: Companies like CarShield or Endurance (sold through dealerships).

3.2. Dealer-Obligor VSCs

In this arrangement, the car dealer themselves acts as the obligor, promising to cover the cost of repairs. Important aspects include:

• Obligor: The car dealer selling the vehicle.
• Administrator: A third-party company manages claims and processes refunds on behalf of the dealer.
• Backup Insurance: Dealer-obligor VSCs must also have backup insurance.
• Regulation: Dealers are regulated by the Department of Motor Vehicles (DMV), but the VSC is regulated by the Department of Insurance.
• Availability: Only available through the dealership selling the vehicle.
• Example: A VSC offered directly by a car dealership.

3.3. Mechanical Breakdown Insurance (MBI)

MBI is an insurance policy that covers mechanical breakdowns. Key characteristics include:

• Obligor: A licensed insurance company.
• Regulation: MBI policies are regulated by state insurance departments, including price regulation to ensure fair and reasonable rates.
• Availability: Sold by banks, credit unions, insurance agents, and directly by insurance companies.
• Example: Policies sold by major insurance companies like Geico or AAA.

Comparison Table

Feature	VSCP VSCs	Dealer-Obligor VSCs	Mechanical Breakdown Insurance (MBI)
Obligor	Licensed VSCP	Car Dealer	Licensed Insurance Company
Backup Insurance	Required	Required	N/A (Insurance Policy)
Administrator	May be used for administration, not claims	Required for claims processing	Claim adjuster hired by insurer
Price Regulation	No	No	Yes
Where to Buy	Car dealerships	Car dealerships	Banks, Credit Unions, Insurers
Internet Sales	Illegal in some cases	Available through dealership websites	Legal
State Regulations	Department of Insurance	DMV & Department of Insurance	Department of Insurance

4. Key Terms in Auto Repair Agreements

What are the most important terms to understand in an auto repair agreement?

Understanding the key terms in an auto repair agreement is crucial for making an informed decision and avoiding surprises later. The California Department of Insurance emphasizes that the most important provisions involve the obligor, price, duration, coverage, exclusions, claim process, and backup insurance company.

4.1. The Obligor

The obligor is the entity legally responsible for paying for covered repairs. It’s essential to know whether the obligor is a VSCP, a dealer, or an insurance company. Over the past 40 years, many VSCP companies and car dealers have gone out of business, leaving consumers with worthless contracts. Always check if the VSC contains the name and address of a CDI-authorized backup insurance company.

4.2. The Price

The price of the repair agreement depends on several factors, including the type of vehicle, its mileage, the extent of coverage, and the duration of the agreement. Car dealers can set their prices, while MBI policy prices are regulated by the CDI to ensure they are fair and reasonable. Negotiating the price of a VSC is possible, while MBI prices are usually fixed.

4.3. The Duration

The duration specifies how long the repair agreement is valid, typically measured in years or miles. Common durations range from one year/12,000 miles to ten years/100,000 miles.

4.4. What Is Covered

Different repair agreements provide different levels of coverage. Some cover only major components like the engine, transmission, and drivetrain (powertrain coverage), while others offer broader coverage that includes suspension, brakes, and air conditioning. The broadest level of coverage, known as “exclusionary” coverage, includes every mechanical part except those specifically listed as exclusions.

4.5. What Is Not Covered (Exclusions)

All repair agreements have a section that lists what is not covered. Common exclusions include:

• Failure to service the car as recommended by the manufacturer.
• Overheating.
• Insufficient, improper, or contaminated coolants, lubricants, or other fluids.
• Alterations to the vehicle.
• Towing excessive weight.
• Damage to a non-covered part caused by the failure of a covered part.
• Damage to a covered part caused by failure of a non-covered part.
• Damage that existed prior to the effective date of the contract (pre-existing condition exclusion).
• Negligence or abuse.

4.6. What You Need to Do If There Is A Claim

Repair agreements provide instructions on what to do if your car needs repairs. This typically involves reporting the issue to the obligor or administrator and obtaining authorization before proceeding with the repair. Failure to follow these instructions may result in a denied claim.

4.7. The Backup Insurance Company

To protect consumers, California law requires that most VSCs have a backup insurance company. This company will review and pay claims if the VSCP or dealer fails to do so. Ensure the name and address of the backup insurance company are clearly printed on the contract.

Understanding these terms will help you evaluate the value and suitability of an auto repair agreement for your specific needs.

5. How to Choose the Right Auto Repair Agreement

What steps should you take to ensure you select the best auto repair agreement for your needs?

Choosing the right auto repair agreement requires careful evaluation and research. Here’s a step-by-step guide to help you make an informed decision:

5.1. Assess Your Needs

Consider the age, mileage, and condition of your vehicle. If you have an older car with high mileage, you may want more comprehensive coverage. If your car is newer, you might be comfortable with basic powertrain coverage.

5.2. Research Different Providers

Look into various VSCPs, dealers, and insurance companies offering MBI policies. Check their ratings and reviews on sites like the Better Business Bureau (BBB) and Consumer Reports.

5.3. Obtain and Read Sample Agreements

Request sample agreements from different providers. Don’t rely on brochures or summaries. Read the full contract to understand the coverage, exclusions, and terms.

5.4. Compare Coverage and Exclusions

Carefully compare what is covered and what is not. Pay attention to exclusions that might affect your vehicle, such as wear and tear, lack of maintenance, or specific parts.

5.5. Check for Backup Insurance

If you’re considering a VSC, verify that it includes the name and address of a backup insurance company licensed by the state. If the backup insurer is a risk retention group, understand that the CDI does not regulate them as closely as licensed insurance companies.

5.6. Compare Prices

Get quotes from multiple providers and compare the costs. Remember that the lowest price isn’t always the best value. Consider the coverage, exclusions, and reputation of the provider.

5.7. Understand the Claim Process

Familiarize yourself with the claim process. Know who to contact, what documentation is required, and how long it typically takes to get a claim approved.

5.8. Consider the Duration

Choose a duration that aligns with how long you plan to keep your vehicle. If you plan to sell your car in a few years, a shorter-term agreement may be sufficient.

5.9. Check Cancellation Policy

Understand the cancellation policy. California law allows you to cancel a VSC within 60 days of receiving the contract (or 30 days for used cars without a manufacturer warranty) for a full refund, provided you haven’t filed a claim.

5.10. Consult with a Mechanic

If you’re unsure about what coverage you need, consult with a trusted mechanic. They can provide insights into potential issues with your vehicle and recommend appropriate coverage.

5.11. Negotiate (If Possible)

You can negotiate the price of a VSC with a dealer. Use competing quotes to leverage a better deal. MBI policies, however, typically have fixed prices.

5.12. Avoid Pressure Sales

Don’t feel pressured to make a decision on the spot. Take your time to review the agreement and make sure it meets your needs.

By following these steps, you can select an auto repair agreement that provides the right coverage at a fair price, giving you peace of mind and protecting you from unexpected repair costs.

6. Understanding Exclusions in Auto Repair Agreements

What common exclusions should you be aware of in auto repair agreements?

Understanding the exclusions in an auto repair agreement is as crucial as understanding the coverage. Exclusions define the circumstances under which the agreement will not pay for repairs. Being aware of these can help you avoid surprises and ensure you make an informed decision. Here are some common exclusions to watch out for:

6.1. Wear and Tear

Many agreements exclude repairs needed due to wear and tear. This means that if a part wears out from normal use, rather than breaking due to a defect, the repair won’t be covered. This is especially important to consider for used vehicles.

6.2. Lack of Maintenance

Failure to perform routine maintenance as recommended by the manufacturer can void your coverage. This includes oil changes, fluid checks, and other essential services. Keep detailed records of all maintenance performed.

6.3. Overheating

Damage caused by overheating is often excluded. This is because overheating can be attributed to a lack of maintenance, such as insufficient coolant.

6.4. Insufficient or Contaminated Fluids

Damage resulting from using the wrong fluids or allowing fluids to become contaminated can be excluded. Always use the fluids recommended by the manufacturer.

6.5. Modifications

Alterations to the vehicle, such as aftermarket parts or modifications that aren’t approved by the manufacturer, can void the coverage for related repairs.

6.6. Misuse or Abuse

Damage caused by negligence, abuse, or improper use of the vehicle is typically excluded. This includes off-roading, racing, or towing beyond the vehicle’s capacity.

6.7. Pre-Existing Conditions

Agreements usually exclude coverage for pre-existing conditions—problems that existed before the agreement took effect. Have your vehicle inspected before purchasing an agreement to identify any potential issues.

6.8. Environmental Damage

Damage caused by environmental factors, such as floods, earthquakes, or other natural disasters, is generally not covered.

6.9. Commercial Use

Vehicles used for commercial purposes, such as taxi services or delivery services, may not be covered unless the agreement specifically includes commercial use coverage.

6.10. Seals and Gaskets

Some agreements exclude coverage for seals and gaskets, although coverage may be available as an optional benefit.

6.11. Adjustments and Alignments

Routine adjustments, alignments, and machining of brake rotors and drums are often excluded.

6.12. Damage from Non-Covered Parts

Damage to a covered part caused by the failure of a non-covered part may not be covered. Similarly, damage to a non-covered part caused by the failure of a covered part may also be excluded.

6.13. Continued Operation After Warning Light

Continuing to drive a car after a warning light indicates a serious problem can result in a denied claim. Always address warning lights promptly.

By understanding these common exclusions, you can better evaluate the limitations of an auto repair agreement and choose one that provides the coverage you need while avoiding potential pitfalls.

7. Making A Claim: What To Do When You Need A Repair

What steps should you take when you need to make a claim under your auto repair agreement?

Knowing what to do when you need to make a claim is crucial for a smooth and successful experience. Here’s a step-by-step guide:

7.1. Review Your Agreement

Before doing anything, review your auto repair agreement to understand the claim process, coverage, and exclusions. Know the toll-free phone number for reporting claims.

7.2. Report the Problem Immediately

Contact the obligor or claim administrator as soon as you notice a problem. All agreements have a toll-free number for this purpose. Failing to report the issue promptly may result in a denied claim.

7.3. Choose a Repair Facility

Some agreements require you to use a specific repair facility, while others allow you to choose your own. If you have a choice, select a reputable mechanic with experience in the type of repair needed.

7.4. Obtain Authorization

Before authorizing any repairs, obtain a claim authorization number from the obligor or administrator. This number confirms that the repair is covered under your agreement. Write down the authorization number, the name of the person giving the approval, what repairs were approved, and the date and time of the approval.

7.5. Approve Tear Down (If Necessary)

For costly repairs, the obligor or administrator may dispatch an independent inspector to examine the car. You may need to approve a “tear down,” which involves partially disassembling the affected area so the inspector can determine the exact problem and its cause.

7.6. Negotiate with the Repair Facility and Obligor

If the repair facility identifies additional issues not initially covered, contact the obligor or administrator to discuss coverage. Be prepared to negotiate and provide additional information or documentation if needed.

7.7. Keep Detailed Records

Maintain detailed records of all communication with the obligor, administrator, and repair facility. This includes dates, times, names, phone numbers, and summaries of conversations.

7.8. Pay for the Repair

Once the repairs are completed, pay the repair facility. The obligor or administrator will typically reimburse you directly for the covered amount, or they may pay the repair facility directly.

7.9. Review the Invoice

Carefully review the invoice to ensure the charges align with the authorized repairs and coverage. If there are discrepancies, contact the obligor or administrator immediately.

7.10. File an Appeal If Necessary

If your claim is denied, you have the right to appeal. Follow the appeal process outlined in your agreement. Gather any additional information or documentation that supports your claim.

7.11. Contact the Backup Insurance Company

If you have a VSC and the obligor fails to pay the claim, contact the backup insurance company listed on the contract.

7.12. Seek External Assistance

If you’re unable to resolve the issue with the obligor or backup insurance company, you can seek assistance from the California Department of Insurance or consult with an attorney.

By following these steps and keeping thorough records, you can navigate the claim process effectively and increase your chances of a successful resolution.

8. What to Do If Your Claim Is Denied

What steps can you take if your claim is denied under your auto repair agreement?

Having a claim denied can be frustrating, but it’s not necessarily the end of the road. Here are steps you can take to challenge the denial and potentially get your repair covered:

8.1. Understand the Reason for Denial

The first step is to understand why your claim was denied. Contact the obligor or claim administrator and ask for a detailed explanation. Request the specific provisions of the repair agreement they are using to deny your claim.

8.2. Gather Information

Collect as much information as possible to support your claim. This includes:

• Repair estimate: A detailed estimate from the repair facility outlining the necessary repairs and their costs.
• Mechanic’s report: A written report from the mechanic explaining the cause of the breakdown and why the repairs are necessary.
• Maintenance records: Proof that you have properly maintained your vehicle, as specified in the repair agreement and owner’s manual.
• Photos: If possible, take photos of the damaged parts or the affected area of the vehicle.

8.3. Consult with the Mechanic

Discuss the denial with your mechanic. Ask if they agree with the obligor’s assessment. If the mechanic disagrees, ask them to provide a written statement explaining why the claim should be covered.

8.4. Write an Appeal Letter

If you believe the denial is unjustified, write an appeal letter to the obligor or administrator. In your letter:

• State the reason for your appeal: Clearly explain why you believe the claim should be covered.
• Provide supporting evidence: Attach copies of all relevant documents, including the repair estimate, mechanic’s report, maintenance records, and photos.
• Address the specific reasons for denial: Explain why the exclusions mentioned by the obligor or administrator do not apply to your situation.

8.5. Contact the Backup Insurance Company

If you have a VSC, send a copy of your appeal letter and supporting documents to the backup insurance company listed on the contract.

8.6. File a Complaint with the Department of Insurance

If the obligor or backup insurance company denies your appeal, you can file a complaint with the California Department of Insurance (CDI). The CDI can investigate the denial and help resolve the dispute.

8.7. Consider Legal Action

If all other avenues fail, you may consider legal action. You can file a lawsuit in small claims court against the obligor (if your claim is $10,000 or less) or consult with an attorney to explore other legal options.

8.8. Be Persistent

Don’t give up easily. Many claims are initially denied but are later approved upon appeal. Be persistent, gather as much information as possible, and present a strong case.

By following these steps, you can increase your chances of overturning a denied claim and getting the coverage you deserve.

9. New Car Warranties vs. Auto Repair Agreements

What’s the difference between a new car warranty and an auto repair agreement, and when do you need each?

Understanding the difference between a new car warranty and an auto repair agreement (VSC or MBI) is crucial for making informed decisions about your vehicle’s coverage.

9.1. New Car Warranty

A new car warranty is included in the purchase price of a new vehicle and is provided by the manufacturer. It covers defects in materials or workmanship that occur during a specified period or mileage. Key features include:

• Coverage: Typically covers major components like the engine, transmission, and drivetrain, as well as other parts that may be defective.
• Duration: Varies by manufacturer, but often ranges from 3 years/36,000 miles to 5 years/60,000 miles. Powertrain warranties may extend to 10 years/100,000 miles.
• Cost: Included in the purchase price of the vehicle.
• Obligor: The vehicle manufacturer.
• Lemon Law: In California, seriously defective new cars may be covered under the “Lemon Law,” which provides for replacement or refund of the vehicle.

9.2. Auto Repair Agreement (VSC or MBI)

An auto repair agreement is an optional, purchased contract that covers the cost of certain vehicle repairs after the manufacturer’s warranty expires. Key features include:

• Coverage: Varies depending on the agreement, but can range from basic powertrain coverage to more comprehensive coverage that includes suspension, brakes, air conditioning, and other parts.
• Duration: Varies depending on the agreement, but can range from 1 year/12,000 miles to 10 years/100,000 miles.
• Cost: Purchased separately from the vehicle. The price depends on the vehicle type, mileage, coverage, and duration of the agreement.
• Obligor: Could be a VSCP, a car dealer, or an insurance company (for MBI).
• Backup Insurance: VSCs typically have backup insurance to cover claims if the obligor goes out of business.

9.3. When Do You Need Each?

• New Car Warranty: You automatically have this coverage when you purchase a new vehicle. You don’t need to take any additional action.
• Auto Repair Agreement: Consider purchasing an auto repair agreement when your new car warranty is about to expire, especially if you plan to keep the vehicle for a long time. This can provide continued protection against unexpected repair costs.

9.4. Overlapping Coverage

It’s important to note that you don’t need an auto repair agreement while your new car warranty is still in effect. The warranty will cover any covered repairs during that period. An auto repair agreement is designed to kick in after the warranty expires.

9.5. Considerations

• Vehicle Reliability: If you have a vehicle known for reliability, you may be comfortable skipping the auto repair agreement. However, even reliable cars can experience unexpected issues.
• Budget: Consider your budget and risk tolerance. If you can afford to pay for unexpected repairs out of pocket, you may not need an agreement. If you prefer predictable expenses, an agreement can provide peace of mind.
• Long-Term Ownership: If you plan to keep your car for many years, an auto repair agreement can be a worthwhile investment, especially as the vehicle ages and becomes more prone to breakdowns.

By understanding the differences between new car warranties and auto repair agreements, you can make informed decisions about your vehicle’s coverage and protect yourself from unexpected repair costs.

10. Buying an Auto Repair Agreement: Dos and Don’ts

What are the key dos and don’ts to keep in mind when purchasing an auto repair agreement?

Purchasing an auto repair agreement can be a smart move, but it’s important to approach the process with caution. Here are some key dos and don’ts to keep in mind:

10.1. Dos

• Do Your Research: Research different providers and compare their ratings and reviews.
• Do Read the Fine Print: Obtain and carefully read the entire agreement before signing anything. Pay attention to coverage, exclusions, terms, and conditions.
• Do Check for Backup Insurance: If you’re considering a VSC, verify that it includes the name and address of a backup insurance company licensed by the state.
• Do Understand the Claim Process: Familiarize yourself with the claim process, including who to contact and what documentation is required.
• Do Negotiate the Price: If possible, negotiate the price of the agreement.
• Do Keep Maintenance Records: Maintain detailed records of all maintenance performed on your vehicle.
• Do Ask Questions: Don’t hesitate to ask questions about anything you don’t understand.
• Do Consider Your Needs: Choose an agreement that aligns with your specific needs and budget.
• Do Shop Around: Get quotes from multiple providers and compare the costs.

10.2. Don’ts

• Don’t Feel Pressured: Don’t feel pressured to make a decision on the spot. Take your time to review the agreement and make sure it meets your needs.
• Don’t Rely on Verbal Promises: Only rely on what is written in the agreement. Verbal promises are not legally binding.
• Don’t Assume Full Coverage: Don’t assume that the agreement covers everything. Carefully review the exclusions.
• Don’t Skip the Inspection: Have your vehicle inspected before purchasing an agreement to identify any pre-existing conditions.
• Don’t Ignore Maintenance: Don’t neglect routine maintenance, as this can void your coverage.
• Don’t Buy from Unlicensed Providers: Only buy from licensed VSCPs, dealers, or insurance companies.
• Don’t Buy Over the Phone or Internet (VSCs): In California, it is illegal to sell VSCs over the phone or internet. Only purchase VSCs in person through a vehicle dealer licensed by the California Department of Motor Vehicles.
• Don’t Overlook the Cancellation Policy: Understand the cancellation policy before you buy.

By following these dos and don’ts, you can make an informed decision and purchase an auto repair agreement that provides the right coverage at a fair price, giving you peace of mind and protecting you from unexpected repair costs.

11. Can You Cancel An Auto Repair Agreement?

What are your rights regarding canceling an auto repair agreement, and how do you do it?

Yes, you can cancel an auto repair agreement, and California law provides certain protections for consumers who do so.

11.1. California Law

California Civil Code Section 1794.41 allows you to cancel a VSC under certain conditions. You are entitled to a full refund of the VSC purchase price if you meet all of the following requirements:

• You cancel the VSC within 60 days after receiving the contract, or 30 days if your car is used and came without a manufacturer warranty.
• You send your cancellation notice as specified in the VSC.
• You have not filed a claim with the dealer or VSCP. (If you have filed a claim, you may still cancel, but you will only receive a partial refund.)

11.2. Partial Refund

You are entitled to a partial refund if you cancel after either 60 or 30 days (whichever is applicable), regardless of whether you have filed a claim. The obligor may keep some of the premium based on the elapsed time or mileage or retail value of service performed, as specified in the VSC. The obligor may also keep a fee of up to $25.00 or 10% of the price of the VSC, whichever is less.

11.3. How to Cancel

To cancel an auto repair agreement, follow these steps:

1. Review Your Agreement: Read your agreement carefully to find the cancellation instructions.
2. Send Written Notice: Send a written cancellation notice to the obligor or administrator, as specified in the agreement.
3. Keep a Copy: Keep a copy of your cancellation notice and any supporting documents.
4. Send by Certified Mail: Send the cancellation notice by certified mail with return receipt requested to ensure proof of delivery.
5. Follow Up: Follow up with the obligor or administrator to confirm that your cancellation request has been processed.

11.4. What if the Obligor Doesn’t Honor the Cancellation?

If a VSCP or dealer does not honor the cancellation and refund sections of the contract, contact the insurance company listed on the VSC. If the insurance company does not resolve the problem, contact the CDI.

11.5. Important Considerations

• Act Promptly: Cancel within the specified time frame to be eligible for a full refund.
• Follow Instructions: Follow the cancellation instructions in your agreement carefully.
• Keep Records: Keep detailed records of all communication with the obligor or administrator.

By understanding your rights and following these steps, you can successfully cancel an auto repair agreement and receive any applicable refund.

12. Used Car Auto Repair Agreements: What You Need to Know

What specific considerations apply when purchasing an auto repair agreement for a used car?

Buying a used car can be a great way to save money, but it also comes with increased risk of unexpected repairs. A used car auto repair agreement can provide peace of mind, but it’s important to approach the purchase with caution. Here are some specific considerations to keep in mind:

12.1. Increased Risk

Used cars are more likely to need repairs than new cars. This is because they have more mileage and have been subject to wear and tear.

12.2. Importance of Inspection

Before buying a used car or an auto repair agreement, have the car inspected by a reliable mechanic who is independent of the dealer. This can help you identify any existing problems or potential issues.

12.3. Wear and Tear Coverage

Many used car VSCs exclude repairs needed due to wear and tear. If you are buying a VSC for a used car, be sure to buy one that does not exclude repairs needed because of wear and tear.

12.4. Coverage Limitations

Generally, the higher the mileage on a used car, the fewer the number of parts that will be covered, and/or the broader the exclusions will be.

12.5. Essential Coverage

In addition to buying a used car VSC that doesn’t exclude wear and tear coverage, look for one that covers seals and gaskets, computers, and sensors.

12.6. Pre-Existing Conditions

If there is any problem with your vehicle at the time of purchase, the Obligor may refuse to repair the vehicle because of a pre-existing condition exclusion. Make sure the dealer fixes any problems with your vehicle before you buy.

12.7. Cancellation Period

California law allows you to cancel a VSC within 30 days of receiving the contract if your car is used and came without a manufacturer warranty.

12.8. Questions to Ask

• What is the vehicle’s repair history?
• Are there any known problems with this make and model?
• What is the mileage on the vehicle?
• What is the duration of the agreement?
• What is the cost of the agreement?
• What is the deductible?
• What is covered and what is excluded?
• Does the agreement cover wear and tear?
• Who is the obligor?
• Is there backup insurance?
• What is the claim process?
• Can I cancel the agreement?

By considering these factors and asking the right questions, you can make an informed decision about whether a used car auto repair agreement is right for you.

13. Resources for Auto Repair Agreement Information

Where can you find reliable resources for more information about auto repair agreements?

Here are several resources you can consult for reliable information about auto repair agreements:

13.1. California Department of Insurance (CDI)

The CDI is the state agency that regulates the insurance industry in California. Their website (www.insurance.ca.gov) provides information about auto repair agreements, including consumer guides, tips, and resources. You can also contact their Consumer Hotline at 1-800-927-4357.

13.2. Better Business Bureau (BBB)

The BBB is a non-profit organization that provides ratings and reviews of businesses. You can use the BBB website (www.bbb.org) to check the ratings of VSCPs, dealers, and insurance companies.

13.3. Consumer Reports

Consumer Reports is a non-profit organization that provides unbiased product testing and ratings. Their website (www.consumerreports.org) may have information about auto repair agreements, including ratings and reviews.

13.4. National Association of Attorneys General (NAAG)

The NAAG is an organization that represents the attorneys general of the 50 states. Their website (www.naag.org) may have information about auto repair agreements, including consumer alerts and enforcement actions.

13.5. Federal Trade Commission (FTC)

The FTC is a federal agency that protects consumers from deceptive or unfair business practices. Their website (www.ftc.gov) may have information about auto repair agreements, including consumer alerts and enforcement actions.

13.6. California Bureau of Automotive Repair (BAR)

The BAR licenses and regulates automobile repair shops in California. Their website (www.bar.ca.gov) provides information about auto repair and maintenance, as well as resources for consumers. You can also contact them at (800) 952-5210.

13.7. Legal Aid Societies

If you need legal assistance, you can contact a legal aid society in your area. Legal aid societies provide free or low-cost legal services to low-income individuals.

13.8. Consumer Advocates

There are many consumer advocates who can provide information and assistance with auto repair agreements.