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Goodbye, lifetime service contracts!

by David Zatz on

Take yourself back to July 26, 2007.  Chrysler Corporation had been taken over by Daimler-Benz a mere nine years ago, and had apparently spent most of that time denigrating the quality, design, and engineering of their American conquest. Now, in July, Chrysler was run by Cerberus Capital Management, and with a stunning amount of high-cost debt to pay off.

FCA / Chrysler service contracts

How could Chrysler both assuage customers’ fears of poor quality and raise cash quickly? One answer, dating back decades, was longer warranties; another was letting customers buy lifetime service contracts. If anything should go wrong, Chrysler would pay the bill for fixing it. Don’t worry about your transmission or engine, Chrysler said; if anything goes wrong, we’ll take care of it. Just pay us some money now (say, $2,000), and we’ll cover powertrain, or air conditioners, or the entire car.

The deal wasn’t just to make sales, either; buyers could get a policy that would cover any car they’d purchased (new), going back four years. That meant that, in theory, the buyer of a 2003 Dodge Neon would buy a lifetime service contract that would keep his or her car alive into 2018, at little cost.

Fast forward to 2018, and Chrysler—or, rather, FCA US—is doing much better. Net debt is about to become zero, or has already become zero; retail sales have skyrocketed. But there are thousands and thousands of owners with old service contracts, and every time something goes wrong—a water pump fails, a transmission starts slipping—FCA Service Contracts is on the hook for the repair.

Service contracts were a terrific idea in 2007; maybe not so much in 2017. So, after an eleven year run, FCA US has finally dropped the plans (now dubbed Mopar Vehicle Protection), as of December 1, 2018.

Buyers can still get a wide range of vehicle protection plans that cover just powertrain, just a/c, oil changes, or the entire car. The top plan, though, only goes up to eight years or 125,000 miles.

Current lifetime contracts will still be honored until either the cars disappear, through crash or sale, or the value of the car sinks below the cost of the next repair. At that point, Chrysler has the right to pay for the value of the car, rather than the repair, and buy themselves out of the contract. Until then, if you have that 2003 Neon and lifetime contract, just keep racking up those $200-$1,200 repairs. Have that air conditioner evaporator replaced! Just don’t try to get anything fixed if it costs more than $1,580, and drive very, very carefully.

Lifetime contract owners must have their vehicles periodically inspected by a dealer. 

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