August 15, 2018—A new study suggests that many Americans are not ready to pay for major car repairs.
The Harris Poll performed on behalf of Ally Financial surveyed 2,000 Americans and found that more than half of consumers reported having faced a major car repair (which cost them $500 or more) in the last five years.
Meanwhile, a 2018 Federal Reserve study found that when faced with an unexpected $400 emergency expense, 41 percent of adults either could not pay the expense, or would need to borrow money or sell something to cover it. This means that a significant portion of drivers who are faced with unexpected repairs could not cover them out-of-pocket.
Of consumers who reported paying for major repairs, 58 percent said they had to spend $1,000 or more, while 33 percent said they spent $2,000 or more.
Ally Insurance said the findings may lead some consumers to consider vehicle service contracts (VSC), which cover repairs that often are not covered by factory warranties or are no longer covered by expired warranties. Only 18 percent of those surveyed reported buying a VSC in the last five years. Nearly three in five (59 percent) of those who had purchased VSCs said the peace of mind that comes from knowing repairs are covered was the top motivator for buying the coverage.
"Service contracts provide customers with the security of knowing they don't have to worry about car repair bills derailing their budgets or putting them in debt," Manzo added. "Payments for some VSCs can be rolled into regular auto payments, making it easier for consumers to budget and map out their expenses ahead of time. You can't know when to expect the unexpected, but you can plan ahead by talking to your dealer about vehicle service contracts."
