A vehicle service contract is a paid plan that kicks in to help cover vehicle repair costs after the expiration of the manufacturer’s warranty that is covered in the purchase of a new, as well as some used or certified pre-owned, cars.

Although it is sometimes referred to as an extended warranty, a vehicle service contract is not officially a warranty by legal definition.

What Is a Manufacturer’s Warranty?

This is the carmaker’s promise to cover repairs and specific problems with your vehicle, sometimes even routine maintenance. The warranty is usually valid over a certain period of time or a certain number of miles. It is usually built into the price of your new car.

Car dealerships often offer a range of warranty options, the most common being the full warranty and the limited warranty.

Typically, when your warranty expires, you will then have to shoulder the cost of any repairs from that point on.

What Are the Benefits of a Vehicle Service Contract?

The major benefit of getting a vehicle service contract is that it allows you to save on unforeseen repairs for a car that’s aging (which means more repairs needed down the line) and no longer covered by warranty.

Additionally, when a vehicle service is transferrable (unfortunately, it’s not always the case), it helps increase the resale value of your car when you decide to sell—especially, if you tend to change cars quite often.

Is a Vehicle Service Contract a Must?

Although a vehicle service contract is a smart investment, you are not required to buy it when you buy a car, or in order to get financing. The manufacturer’s warranty will cover most of the repair costs for its specified coverage period, so technically, you won’t need the benefits of the vehicle service contract until after your manufacturer’s warranty runs out.

What Determines the Cost of a Vehicle Service Contract?

A number of factors determine the cost of a vehicle service contract. These are the most common:

  • The make and model of the car
  • The length of the contract
  • What the contract will cover (third-party providers offer a number of packages to choose from)

Just like insurance policies, most warranties have a deductible, which means you will pay the first cost (for example, the first $100) of the repair. The amount of the deductible is an important factor to consider, and so is the question of whether it is “per visit” or “per repair.” Also consider whether the warranty is transferrable if you sell the car. You will have to pay more, but the additional cost will be offset by the higher resale value.

So, Should You Invest in a Vehicle Service Contract?

Yes, a vehicle service contract is a practical investment, but you need to do your research and make the smartest choice you can. Ultimately, the money you will be paying each month should be worth it.

Call us today for a consultation if your warranty is expiring soon.