• What is an extended service contract and should I purchase one? Generally speaking, it is an insurance policy. The policy underwriter’s Actuary Department (this department is made of many smart people that love to crunch numbers and lots of them) gathers data from a variety of claims, much like warranty claims or insurance claims. The claims received from their customers, or better known as policy holders, are analyzed by combining similar issues and their associated repair costs. The individual claim items and occurrences are combined to create a total cost per unit. The insurance carrier then spreads this “risk” over their many policy holders. Since the risk is spread over thousands of customers, an individual unit’s cost of repair, if higher than the average, is mitigated by the other policy holders.

    Now,does this sound like an insurance policy? It should, as it is. Nearly all extended service contracts and regardless of whose nameplate is on the brochure, are underwritten by insurance companies. These insurance companies use the same risk management techniques as they do for homeowner, vehicle, and health insurance policies. What makes them affordable is that the loss risk for the probable servicing of your coach is spread over many other policy holders who may or may not utilize less of the accrued policy purchase funds.

    In many cases, the extended service contract may be a good opportunity to mitigate the future cost of repairs. One of the reasons they are attractive is that the purchase cost of the extended service contract can be spread out over time when financed with the coach.  Second, the policy may also be valuable to a second owner as most policies may be transferred. Third, and although they may not be aware of it, customers purchasing these policies at the time of purchase, are mitigating inflation. Mitigate inflation, but how you may ask? Well, here’s how, as these policies contain a one time purchase fee and not a monthly payment as would your homeowner, vehicle or health insurance, a policy holder is in essence hedging against inflation. For instance, if you were to purchase a seven year service contract, you are in essence purchasing the labor and parts cost up front at the actuary’s, (remember them?, they’re the numbers people), labor rate and parts cost assumptions. As the dealer service labor rates as well as part cost inflation increase over the next seven years, the insurer and not the policy holder will be subject to these increases. In recent years, the parts costs and dealer labor rates have increased well beyond the rate of inflation. Hedging against these increases by purchasing a service contract can be a wise investment. Fourth, many customers prefer the insurance route so that they will not subject to a possible large repair bill at the time that they would rather be enjoying their Klub’s excursion.

    So, if they’re so great, why can’t Newmar offer an extended service contract? Well, in actuality, there is nothing that precludes Newmar from putting its name on an extended service contract. In fact, Newmar very seriously considered this at the suggestion of several Kountry Klub members. Newmar chose an underwriter (insurance company) and began the discussion of offering a Newmar branded policy. Keeping in mind that there are many policies available to customers today and most of them cost about the same because each insurance company’s Actuary Departments are crunching similar numbers.  However, when a relatively small company like Newmar decides it wants these very smart people to crunch the relatively small amount of Newmar claims against a relatively small amount of Newmar coaches, the benefits of risk management, as outlined in the second paragraph above, are not appreciable. This results in a much higher purchase price than existing available policies which have longer terms.

    Upon careful consideration, Newmar management, at the advice of the extended service contract underwriter, determined that the cost obstacle to offer a Newmar branded extended service contract was not in the best interest of our customers and after all, your best interest is our best interest. Newmar appreciates our customers and as our relationship most often extends beyond just manufacturer and customer, Newmar feels a responsibility to offer products that are of exceptional value. Unfortunately, as valuable as a service contract may be, one that costs more than an existing plan with richer benefits would not be providing our friends a product in their best interest.