Vehicle service contracts can save you money on costly car repairs.
Manufacturers and third-party providers both offer vehicle service contracts.
Extended protection can be a worthwhile financial investment for many drivers.
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Whether you’re about to purchase a new car or are nearing the end of your factory warranty, you may be considering a vehicle service contract to keep your vehicle in peak condition while also saving money. But what do vehicle service contracts include, and are they worth the cost?
In this article, we’ll discuss vehicle service contracts in-depth, including what they typically cover, additional perks that may be included, and average price points. We’ll also go over the pros and cons of buying an extended warranty from a manufacturer versus a third-party provider.
It’s best practice to get more than one quote when shopping around for a vehicle service contract. We’ve reviewed the best extended car warranty companies, and you can reach out to a few of our top recommended providers for free, personalized quotes below.
Top Extended Warranty Companies
We reviewed the best extended auto warranty providers, and here are our top picks.
A vehicle service contract – also called an extended auto warranty, vehicle protection plan, or extended service contract – protects you from paying for unexpected car repairs out of pocket after your factory warranty expires.
There are two main types of vehicle service contracts: a powertrain warranty and a bumper-to-bumper warranty. A powertrain warranty covers the components that make your vehicle move: the engine, transmission, transfer case, drive axles, and other related components. A bumper-to-bumper warranty covers most vehicle parts between your front and rear bumpers. Bumper-to-bumper warranties are often exclusionary, meaning that instead of listing every part that’s covered, your contract will only list what isn’t covered.
Many vehicle service contract providers offer coverage in between these two extremes, such as plans that cover your powertrain as well as your brakes, air conditioning, audio system, or other major components.
What Isn’t Covered Under a Vehicle Service Contract
Even the most extensive vehicle service contracts have a few exclusions. Most plans won’t cover:
Tires, wheels, and rims
Paint, glass, or upholstery
Routine maintenance services
Wear-and-tear parts like brake pads and wiper blades
Damage resulting from accidents, collisions, abuse, or misuse
Damage resulting from environmental events like floods or acid rain
Vehicle service contracts also don’t cover pre-existing issues. Most providers have a waiting period of 30 days and 1,000 miles before coverage kicks in. This is to make sure your vehicle doesn’t have any existing defects.
Many vehicle service contracts come with certain benefits at no additional cost. Typically, these perks include:
24-hour roadside assistance: This service typically includes fuel deliveries, lockout assistance, battery jump-starts, and winching.
Towing services: If your vehicle breaks down, the provider will pay for it to be towed to the nearest dealership or authorized repair facility.
Rental car reimbursement: When your vehicle is in the shop for a covered repair, a provider may offer reimbursement for alternative transportation, like a rental car.
Trip interruption reimbursement: If a mechanical breakdown occurs while you’re far from home and you have to stay overnight while repairs are made, this benefit will help cover food and lodging up to a certain dollar amount.
How Does a Vehicle Service Contract Work?
A vehicle service contract can be purchased either from a manufacturer or a third-party provider. There are benefits and disadvantages to either option, so it’s best to look at all aspects before deciding which is best for your needs.
Here are a few differences between manufacturers’ extended warranties and third-party vehicle service contracts:
Manufacturer Vehicle Service Contract
Third-Party Vehicle Service Contract
Vehicle service contracts offered by manufacturers tend to be more expensive and may be subject to dealership markups.
Third-party vehicle service contracts are often more budget-friendly.
Most manufacturers mandate contract holders to go to a dealership for covered repairs.
Third-party providers allow for repairs to be made at dealerships and independent repair shops.
Repairs are guaranteed to be performed by factory-trained technicians using genuine replacement parts.
Repairs can be performed at a dealership by factory-trained technicians, but third-party providers may not always cover the full cost of genuine parts.
Manufacturers tend to offer between one and three vehicle service contract options.
Third-party providers tend to have more plans, with many offering five or six options to choose from.
Time Limits for Purchasing
Manufacturer-backed vehicle service contracts usually need to be added on at the time you purchase your vehicle or before your factory warranty expires.
Third-party plans can usually be purchased at any time, so long as your vehicle is within a provider’s age and mileage eligibility requirements.
A vehicle service contract from a manufacturer may be more specialized for your particular car brand and model.
Third-party providers’ vehicle service contracts tend to be more generalized so they can cover many different vehicles.
Manufacturer-backed vehicle service contracts only extend up to 150,000 miles.
Third-party vehicle service contracts have term limits up to 250,000 miles.
How Long Does a Vehicle Service Contract Last?
Vehicle service contracts last for an agreed term length that can span anywhere from a few months to over a decade. Usually, a contract comes with a time limit as well as a mileage limit. For example, a 7-year/100,000-mile vehicle service contract lasts for either 7 years or until your vehicle reaches 100,000 miles, whichever comes first.
Here are a few examples of term limits from popular manufacturers and third-party providers:
Based on data we’ve sourced from industry-leading providers, the average vehicle service contract cost ranges from about $1,700 to $4,000 in total. This is a large range because costs depend heavily on individualized factors including:
The coverage you choose: The more comprehensive your plan is, the more it will cost. Additionally, longer contracts are typically more expensive.
The deductible you choose: As with auto insurance, selecting a lower deductible will lead to a higher overall coverage cost. Typical vehicle service contract providers offer $0, $50, $100, and $200 deductible options.
Your vehicle age and mileage: If you’re purchasing a policy for an older or higher-mileage vehicle, it’ll typically come at a higher premium. This is because cars tend to break down more often as they age and wear.
Your vehicle make and model: If you drive a luxury vehicle or your car has many high-tech components, it’s likely that repairs and replacement parts will be more expensive. Therefore, the cost of your vehicle service contract will be higher.
The cost of your vehicle service contract may also depend on how you choose to pay for it. Many third-party providers offer the option to pay upfront or choose a zero-interest monthly payment plan, which won’t affect your total cost. However, dealerships often allow you to roll the cost of extended coverage into your vehicle financing. This means you’ll be paying interest on your plan.
Are Vehicle Service Contracts Worth It?
Vehicle service contracts are worth it for many drivers. In fact, a recent study by Pegasystems Inc. reported that “62 percent of consumers with active warranties report benefitting from them within the past year.” However, the value of a vehicle service contract will ultimately depend on the driver and vehicle. Extended auto warranties can save money on costly repairs but may not be the best financial investment for everyone.
They enhance vehicle longevity by ensuring you can afford repairs later in your car’s life.
If you do not experience frequent breakdowns, some coverage may go unused.
You’ll save money on expensive repairs, especially if they cost more than you paid for your coverage.
Every contract has certain exclusions and limitations, so not all repairs and services will be covered.
Coverage is usually customizable, so you have the choice to only pay for the coverage you want or anticipate needing.
There are often waiting periods before coverage kicks in.
If you plan on selling your vehicle shortly after your factory warranty expires, you probably don’t need a vehicle service contract. However, if you’re one of the many drivers who intend to keep their vehicles around for the long haul, an extended warranty can help you keep your car running in peak condition.
However, drivers with highly reliable cars, or even lengthier factory warranties, may just want to budget for repairs rather than purchasing a vehicle service contract.
If you’re not sure about a vehicle service contract’s value, consider reaching out for free, personalized quotes from our top recommended providers below. With multiple quotes, you can effectively compare plans based on their coverage and price points.
Our Top Recommendations for Vehicle Service Contracts
As mentioned, reputable extended car warranty companies have many advantages over manufacturer-backed coverage, including affordability, flexible coverage, and more repair shop options. Our review team has thoroughly researched the industry and identified the best providers on the market. Below, we outline two of our top picks.
Endurance: Best Overall
Endurance is our go-to pick for comprehensive coverage. Here are a few of the provider’s standout features:
Endurance’s coverage limits extend up to 15 years or 200,000 miles.
There are sample contracts online that you can review before reaching out for a quote.
Endurance offers five coverage levels that range from basic powertrain coverage to an exclusionary bumper-to-bumper warranty.
Endurance coverage is accepted at thousands of repair facilities nationwide, including dealerships, repair chains, and mom-and-pop shops.
For an in-depth look at this provider, read our Endurance warranty review. You can also click below to get a free, personalized quote from Endurance.