Vehicle Service Contracts: Are They Worth it?
By: Katie Mcdaniel
Tags: Vehicles, Contracts, Cars, Service Contracts, Vehicle Maintenance

Photo by Dan Gold on Unsplash

As a car owner or prospective car owner, you may have heard about vehicle service contracts without knowing exactly what they are. These contracts are also referred to as extended service contracts, vehicle protection plans, or (commonly though technically incorrectly) extended auto warranties. A vehicle service contract offers many perks and services that are rarely included in an insurance plan or a manufacturer’s warranty.

Where can you purchase vehicle service contracts? How are they priced? What are the benefits? These are questions you need to know the answers to before deciding what’s right for you. Vehicle service contracts vary widely, as do vehicles themselves!

First, it’s important to understand what a vehicle service contract is and what differentiates it from warranties and insurance. We’ll outline the basics and then dive into the benefits.

What Exactly Is a Vehicle Service Contract (VSC)?

In essence, a vehicle service contract (VSC) covers mechanical car failures over a certain period of time or mileage. It ensures repairs and assistance in the event of these failures.

The contract is signed between a car owner and a third-party VSC provider. The provider agrees to cover services or repairs for your vehicle.

A VSC is similar to a warranty, but it is not the same. If a dealer tries to tell you that you can purchase an extended warranty from a third party, they really mean a vehicle service contract! Unlike a warranty, which is generally included in the purchase of your car, a VSC always requires an extra fee. If you pay for extended coverage of a warranty, that’s technically a VSC.

Vehicle service contracts generally offer specific services rather than inherent or implied faults such as a manufacturer’s defect. A VSC will not extend the exact terms of your existing warranty from the manufacturer. This difference is crucial to understand so that you can maximize your benefits and protection for the full life of your vehicle.

How are Vehicle Service Contracts Priced?

There is no set price for a VSC, as they depend on a few major factors that differ from car owner to car owner:

How comprehensive the coverage of the VSC you plan to purchase is

How old your vehicle is

Whether your car is new or used

Whether you use your car as a ridesharing contractor

If your car is brand new and still covered by a warranty, a VSC may be relatively cheap since your provider is taking on a low risk. If you’re purchasing a luxury vehicle with high horsepower, VSCs can make excellent investments. You’ll need every level of protection you can get for premium vehicles whose components are both expensive and likely candidates for damage.

Purchasing a VSC for a used vehicle is often highly recommended, especially if your car was treated poorly in the past. A car that’s not covered under the manufacturer’s warranty anymore will benefit from this coverage, as will older vehicles with a higher likelihood of mechanical complications.

Because of the higher risk of complications, VSCs for used cars may be more expensive, but they’re often well worth the investment. The price of the repairs needed to maintain an older car quickly adds up, so purchasing a VSC is often much cheaper than paying for multiple repairs yourself. Many different coverage plans exist to cover vehicles of all ages and conditions.

What’s Included in Your Vehicle Service Contract?

What’s covered by your vehicle service contract varies by both the provider and the plan. That’s why it’s extremely important to read your contract thoroughly and understand what exclusions apply.

Some people purchase VSCs because they offer perks that fall outside of the scope of the manufacturer’s warranty, such as 24/7 roadside assistance or GPS repair. The perks alone can be enough for some car owners to sign a contract. Other people purchase VSCs because the manufacturer’s warranty has expired, and without additional coverage, they’re liable for any repairs.

Depending on your plan, VSCs might include:

24-hour roadside assistance

Tire repair or replacement

Rental coverage reimbursement

Towing coverage

Personal concierge service

Key fob replacement

Don’t assume something is covered before signing the contract. For example, if you’re worried about your car’s brakes or you want your alignment checks covered, be sure to read the contract to see if those are included. If what you’re looking for is not listed under your contract’s benefits, assume that it’s not covered. Terms like “normal wear and tear” are subjective, so make sure that the benefits you want are listed explicitly before signing.

Another essential aspect to double-check is who is authorized to perform repairs under your contract. If you prefer a certain service dealer, but that’s not covered under your plan, you may wish to alter your VSC or opt for a different provider. As always, be sure to read the contract thoroughly!

In addition, check if your VSC provider is partnered with insurance companies. This is required in some states, and it also ensures your provider is credible.

All in all, VSCs offer many worthwhile benefits, but it’s essential that you take the time to determine exactly what you want covered. A comprehensive plan often saves time, money, and hassle in the long run, especially in the case of a major mechanical fault. Like insurance, the cost of a VSC pays for itself several times over should you ever encounter unexpected vehicle trouble.

No matter the age or state of your vehicle, there are vehicle service contracts out there for everyone. When you choose a reputable provider and negotiate a fair price, VSCs are great investments for keeping your vehicle in optimal condition without leaving you responsible for repairs.