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How a vehicle service contract works for cars old and new

What we'll cover

  • Learn the difference between warranties and vehicle service contracts

  • What a service contract may cover

  • Considerations when buying a service contract

Whether you’ve barely driven your brand-new car off the lot or had your vehicle for years, an unexpected repair still stings. It’s an inconvenience that can cost you significantly depending on the work that needs to be done.

Auto insurance will help cover repairs from collisions, but what about mechanical or electrical issues? That’s where a vehicle service contract (VSC) can help bridge the gap. By purchasing a VSC (similar to an extended auto warranty) you can help protect yourself from the costs of unexpected repairs.

This extra coverage is often offered when purchasing a new vehicle but can be a good fit for older vehicles as well. On the other hand, depending on your personal driving habits a VSC might not make financial sense, regardless of the age of your vehicle. To make the right choice for you and your car, take a closer look at what a VSC is and what it can offer for new and used vehicles.

Warranties vs. vehicle service contracts

Although some use the terms VSC and extended warranty interchangeably, there are many distinct differences between vehicle service contracts and traditional vehicle warranties . Understanding the key characteristics can help you determine if you could benefit from one for your vehicle.

Warranties vs. vehicle service contracts
Warranty VSC
Term begins at the time of purchase Can be purchased at any time, on a used or new vehicle
Usually expires after three years or 36,000 miles — whichever comes first Expiration depends on the provider
Requires repairs to be done at dealership or manufacturer service center Usually allows flexibility in where repairs are completed
Provided at no charge with vehicle purchase Cost for contract + deductible charged per repair/visit
Applicable for new vehicles or used vehicles still within warranty terms Applicable for new or used vehicles that meet requirements for coverage

What does a service contract cover?

A vehicle service contract helps to protect a plethora of vehicle components and covers various types of repairs, including many high-tech electronic features, engine components, and transmission components. It can often be purchased either directly from the vehicle manufacturer, or from a third-party provider. A VSC typically covers both the cost of the parts and the labor. Some repairs are excluded from coverage depending on the VSC you purchase.

With a more comprehensive VSC, coverage may also include perks like 24/7 roadside assistance, towing, trip interruption protection (reimbursement for a hotel room and food if car troubles require an overnight stay), or rental car reimbursement1. These additional perks may be capped at a certain dollar amount— but they can help to alleviate the all-around hassle of a major vehicle issue.

In most cases, a VSC won’t cover:

  • Routine maintenance (e.g., oil changes)

  • Pre-existing issues

  • Expected repairs (e.g., brake pads, wiper blades)

  • Tires, wheels, rims

  • Paint, glass, upholstery

  • Damage from accidents, collisions, or misuse

  • Damage from flooding or other environmental influences

You should always read the fine print of your VSC to be sure you are aware of any specific exclusions and limitations.

How much does a vehicle service contract cost?

When selecting a vehicle service contract, keep in mind that you will pay for the contract upfront, then will most likely pay a deductible for every repair. The cost of a VSC will depend on various factors, including:

  • Coverage: A contract with more coverage will have a higher cost.

  • Term length: Opting for a longer contract is typically more expensive.

  • Deductible: Providers typically offer $0, $50, $100 and $200 deductible options; the lower the deductible, the more the contract will usually cost.

  • Vehicle year: Older vehicles with higher mileage are more susceptible to breaking down, resulting in a higher contract cost.

  • Vehicle make and model: Luxury cars or vehicles with integrated technology are more expensive to repair, and you guessed it — may come with pricier VSCs.

How to choose a vehicle service contract

Selecting a VSC shouldn’t be a hasty decision; you’ve got to consider the condition of your vehicle, your budget, and how long you plan to keep the vehicle you’re covering. But if your budget doesn’t support the cost, you may have to compromise a bit.

Are vehicle service contracts worth it?

Depending on your vehicle and driving habits, VSCs can be worth the investment. First and foremost, they can help enhance the longevity of your vehicle by providing coverage so that many issues are fixed in a timely manner. If you own an older car or plan on owning yours for a long time, they can help you save money on repairs, especially those that cost more than what you pay for coverage. And if you have an older car that has exceeded your manufacturer’s warranty or have a vehicle loaded with high-tech components, a VSC could be your wallet’s best friend.

Another benefit of a VSC is that the coverage is often customizable based on your needs. You can pay for a VSC that suits your needs. Consider these five reasons to determine if a vehicle service contract is right for you and your vehicle.

Invest in peace of mind

If a potential breakdown could be detrimental to your livelihood, a vehicle service contract could help to provide protection and ease your stress, regardless of the age of your vehicle. While a VSC can’t prevent your car from experiencing issues, it won’t allow an unexpected repair to stop you from  living your life, doing what you enjoy and getting where you need to go.

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