Maybe you’ve heard this one before. (Or worse, experienced it yourself.) You’re in the car headed to work, listening to your favorite tunes or podcast. The road is open, your mind is clear, and the day seems free for the taking.
Then, your car makes a horrible noise and you’re forced to pull over on the shoulder. In an instant, all your good vibes are gone. You end up late to work and remain distracted and generally unhappy for the rest of the day. The stress from your car troubles — and the inevitable expense — turns a would-be great day into a huge hassle.
The point is, when your car breaks down, your life can easily break down with it.
That’s where a vehicle service contract (VSC) can help, giving you greater peace of mind on the road and financial help when you have a bad car day.
What is a vehicle service contract?
You can think of a vehicle service contract as similar to an extended warranty plan for your car. In a nutshell, it offers protection for the mechanical, electrical, and safety components of your vehicle. The covered components for each plan can vary, but a comprehensive VSC covers virtually everything from necessities like your drivetrain down to luxuries like your heated seats or navigation.
Here’s how it works: You purchase coverage and when your car needs a repair, your out-of-pocket costs for replacement parts and labor are taken care of.
A traditional manufacturer’s warranty provides similar coverage, of replacement parts and labor, but usually expires after three years, or 36,000 miles, whichever comes first. A vehicle service contract can help you continue that protection on your vehicle after your manufacturer’s warranty expires.
What type of coverage does a VSC provide?
A vehicle service contract helps to protect thousands of vehicle components and covers most types of repairs, including those involving high-tech electronics, the engine, and transmission. Reimbursement for covered repairs includes both the cost of the part and the labor. Some parts are excluded from coverage depending on the VSC you purchase.
With a good VSC, coverage may also include perks like 24/7 roadside assistance, towing, trip interruption protection (aka reimbursement for a hotel room and food from a restaurant, if your car troubles require an overnight stay), or rental car reimbursement. These additional perks are usually capped at a certain dollar amount in reimbursement — but they can help to alleviate the all-around hassle of a major vehicle issue.
But take note, it’s always important to examine a VSC’s contract for specific exclusions and limitations. You can view a sample contract for Flex Coverage by Ally here.
Not just for breakdowns. A budget-friendly solution for vehicle repairs.
A vehicle service contract doesn’t just come in handy if you experience some sort of extreme mechanical failure with your vehicle. It can also help to make necessary vehicle repairs due to wear and tear more affordable.
If the cost of coverage fits comfortably in your budget, you can avoid the financial stress of being surprised by a vehicle repair.
What are some things to know about vehicle service contracts?
In most cases, a VSC won’t cover routine maintenance like oil changes, new tires, or other expected repairs, so you’ll still need to budget for those separately.
Most VSCs have a deductible that must be paid before the remainder of the claim is covered. That deductible may be charged per visit or per repair. If the deductible is charged per visit, you’ll pay a deductible no matter how much work you’re getting done. But if you’re charged per repair, you could be required to pay your deductible multiple times when having multiple fixes during a visit to the repair shop. With Flex Coverage, you pay your deductible once per claims visit regardless of how many repairs are needed within that visit.
Each VSC has its own rules about how claims are handled. You might have to pay for the repair out of pocket and wait to be reimbursed, or if you have a plan like Flex Coverage, your provider will pay your claim directly to the repair facility so your only out-of-pocket expense is your deductible.
Is a vehicle service contract right for you?
If the thought of getting hit with a huge bill when you least expect it causes you to freak out, a vehicle service contract could provide you peace of mind and ease of budgeting.
Or if you drive lots of miles (voiding your manufacturer’s warranty in just months) or have a car loaded with high-tech components, a VSC could be your wallet’s best friend.
A VSC can’t prevent your car from breaking down, but it could prevent your life from breaking down when you’re hit with car trouble.