(March 23, 2011) TALLAHASSEE, Fla. (PRNewswire) — Sales of motor vehicle service contracts — extended warranties — in the first quarter of 2011 are tracking ahead of sales during the same time frame last year, a likely result of this quarter's marked increase in automotive sales, according to the Service Contract Industry Council (SCIC). 

Sales of cars and light trucks in the United States rose 27 percent in February from a year ago, following a 17 percent increase in January.  The SCIC believes pent-up demand for autos combined with still somewhat cautious consumer spending is creating a strong market demand and need for extended warranty contracts.

"Sales of vehicle service contracts are up for us so far this year by about 60 percent and future outlook is good," said Joe Erdeman, president of the Extended Protection Solutions Business at Assurant Solutions, a national provider of service contracts and an SCIC member. "Growth is coming from an overall lift in the existing dealer market as well as third party administrators, OEMs and insurance company channels."

Another SCIC member, Automobile Protection Corporation, which offers EasyCare vehicle service contracts, also reports positive sales. "First quarter 2011 sales of service contracts are tracking ahead of 2010, in both new and used vehicle categories," said Jennifer Silverberg, vice president of Marketing & Customer Experience at Automobile Protection Corporation.  "The most popular service contracts continue to be those offering long-term coverage."

"The increased complexity of components and analytics in today's motor vehicles has greater financial implications when failure occurs," said Timothy Meenan, executive director of the SCIC, a trade group representing service contract providers and sponsor of industry regulation and consumer protection laws. 

"Service contracts help drivers better manage unexpected, large repair bills; affordably maintain vehicles in top-operating condition; and enhance their vehicle's value."

Automotive service contracts are sold mostly by car dealers and can cover essential yet costly-to-repair systems not included in the manufacturer's power-train warranty, such as air conditioning, power windows, electronics and navigation, and provide coverage after the manufacturer's limited warranty expires. Most service contracts are transferable at vehicle sale to a new owner.