engine. As long as the factory warranty is in effect, the service contract will take a back seat to service from the manufacturer. Thus, if
the service contract is for five years and the warranty lasts two, you’re
actually getting only three years of service contract protection.
Extended-service contracts offered by Mercury and Volvo
begin after the manufacturer’s warranty runs out. The contracts
offered by the independent companies begin as soon as they
receive your premium. Thus, you end up paying for coverage for the period when the manufacturer is responsible for
handling breakdowns. Many independent contract companies
offer a nine-month to one-year window for signing on. Find out
what the window is and wait as long as possible before buying. After the window is closed, you’ll pay considerably more.
Service contracts go into effect when the contract company receives your premium, not when you pay the dealer for the
contract; 25 percent of service contract complaints received by
BoatU.S. involve dealers “forgetting” to send the premium, which
doesn’t come to light until the consumer needs the coverage.
OUT-OF-POCKET COSTS: Having a service contract won’t protect
you from out-of-pocket expenses. Contract companies charge a
nominal deductible, usually $25. Sometimes, it’s just one deductible per incident, sometimes a deductible is charged per item that
needs repair. Plus, the service contract may pay to repair only the
broken engine part, for example, but not pay to remove the engine
from the boat to facilitate repairs. Again, it’s helpful to review the
actual terms of the contract before signing on.
AUTHORIZED REPAIRS: All contract companies require pre-autho-rization before work begins. Some companies go further, requiring
that work be done only by their own network of shops. This isn’t
a problem with the service contracts offered by major manufacturers, but the independent companies have no dealer network to
tap into. Third-party contracts sold by dealers may require that all
work be done by the selling dealer, which isn’t much help if you’re
cruising far from your homeport, if you buy long distance, or if the
dealer is incapable of making the repair.
AN ASSET: Find out if your service contract can be transferred to a
subsequent owner. This can be a real plus when you want to sell.
Some companies charge a fee for the transfer. Contract costs are
prorated. The original buyer gets a refund of the unused portion of
the contract, the new buyer pays for the remaining share.
CHECKOUT TIME: Review the contract company’s policy in issuing
refunds if you decide to cancel the policy early. Some companies
apply the “rule of 78s,” which is a complicated formula that ends
up costing consumers big bucks. A more equitable policy is to base
refunds on the unused portion of the contract.
FINAL CONSIDERATIONS: Most defects in new boats and engines
show up within the warranty period, so spending money up
front on a service contract may not make sense. Consumers
also need to look into the reliability history of their vessels and engines. Some models with higher-than-average problems might necessitate an extended warranty. The BoatU.S.
Consumer Protection Database contains thousands of firsthand reports about boats and engines. This invaluable online
resource, created by consumers for consumers, is available only
to BoatU.S. members at my.BoatUS.com/consumer/database.aspx.
For more information about boat buying, warranties, and
extended service contracts, write to consumerprotection@
BoatUS.com or download our free “BoatU.S. Guide to Buying
& Selling A Boat,” BoatUS.com/Guide, and “BoatU.S. Guide to
Marine Service,” BoatUS.com/MarineServices.
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