Dealerships Often Sneak in Service and Maintenance Contracts at Sale

Dealers may try to slip a service contract into the price of the car to get more money out of you

Signing Contract / Dealerships Often Sneak in Service and Maintenance Contracts at Sale
Image: Pexels
November 10, 2017

Are you in the market for a new car? If so, pay attention to the final paperwork to make sure that you're not getting more than you wanted.

It appears that car dealers are being more crafty in an attempt to increase their sales and bottom line. Have you heard a pitch for not paying any maintenance for so many years or however many miles, or perhaps even a lifetime warranty?

This might be a sneaky service contract thrown into the price of the car that can cost you thousands more than you would have paid out of pocket to address issues as they arise. A $1500 service contract, for example, can end up costing you nearly $2300 over the first four years of the lease or finance.

Only a fraction of a dealer's bottom line comes from the sale of cars. Most of the money that the dealer makes comes from service contracts and other repairs performed inside the service department.

The markup on parts, for example, can be significant. We found in a review recently of car parts in the Raleigh area that car dealers are marking up parts 100% or even higher. A fuel pump for a mid 2000s GM vehicle, for example, runs for about $600 MSRP. The cost to the dealer in our specific example: $89. Add that $511 profit on top of the money they are charging you to perform the work and you can see how lucrative dealer service and parts can be.

As you can see, there is a lot of motivation for a dealership to sell you its service and to keep you coming back for seemingly free services. Even if you are coming in for 'free' service, which is service you prepaid in your loan or lease agreement, you'll likely be subject to high pressure sales tactics to sell you worthless add-ons and fluid flushes. Often, the dealership personnel get a kickback of these sales.

On average during the first five years of ownership, a vehicle typically needs only oil and filter changes. There is really no reason for you to sign a contract for additional service protection beyond the manufacturer warranty for the first few years of ownership.

Even if you do decline this extended coverage or maintenance contracts, though, check your finance paperwork before you sign. Unscrupulous dealership personnel will often slip the service contract onto the paperwork at the last minute, which is often a time when you're willing to just sign anything to get out of that place.

Get Connected with Consumer Connections

Stay up-to-date about issues that really matter! Get the Consumer Connections newsletter!

We're committed to providing you with information you need to make you a better, more informed consumer. Whether it's a vehicle recall, a product recall, or a new scam, we feature it in Consumer Connections.

So why not give it a try? Go on. All of your friends are doing it. It's completely free and comes just once a week.

Don't throw away your good money on unneeded oil changes! Most manufacturers today recommend longer oil changes, such as 6,000 miles, due to improved engine technology, better oils and a better understanding of how oils work. Are you changing your oil more often than is necessary?

Readers have been looking for ways to cut back on costs and have been looking to make those cuts in auto insurance. The main issue then becomes whether to have full coverage or only liability coverage on the vehicle. Before you drop full coverage auto insurance, you'll want to do some thinking.

If you've ever purchased or looked into purchasing a used vehicle, chances are good that you've either seen or at least heard of CARFAX, a service that provides historical information on used vehicles. But just how reliable is the information that CARFAX reports provide? They are only as good as the information that is reported.

We are urging consumers to avoid purchasing model year 2005-2010 Nissan Pathfinder, Frontier and Xterra vehicles equipped with an automatic transmission due to a potential defect that could cost thousands of dollars to repair and put the vehicle occupants' safety at risk.