Vehicle service contracts are a good way to plan for the cost of car repairs. Rather than pay out of pocket for repairs as they arise, you can budget for a protection plan that pays the cost of repairs for you.
But what exactly is a vehicle service contract, and how does it work? This article will explain the ins and outs of vehicle service contracts—also called extended car warranties or vehicle protection plans—and recommend some of the best extended car warranty companies to purchase coverage from.
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About Vehicle Service Contracts
A vehicle service contract is similar to a warranty in that it’s an agreement to cover the cost of repairs for certain components. Customers either pay monthly or upfront. In exchange, the vehicle service contract administrator pays repair costs for malfunctions in mechanical and electrical systems.
What is the Difference Between a Warranty and a Service Contract?
Car warranties come with all new vehicles and act as guarantees against defective or poorly installed parts. Vehicle service contracts are agreements between a customer and contract administrator that the administrator will pay for select repairs. Vehicle service contracts may be purchased while a car is still under its factory warranty, but coverage really takes effect after the car’s warranty has expired.
Warranties are provided by the manufacturer, and service contracts can be purchased from the manufacturer or a third-party provider. New car warranties typically provide more comprehensive coverage than vehicle service contracts, but not always.
How Does a Vehicle Service Contract Work?
The claims process for each vehicle service contract is different, though most have some similarities. Usually, the process entails the following steps:
- Take your vehicle to a dealership or repair facility certified by the National Institute for Automotive Service Excellence (ASE®).
- Give the service technician your contract information.
- A service technician will contact your plan administrator.
- Authorize teardown service to diagnose the issue.
- The technician will report findings to your administrator, who then approves or denies your claim.
- If your claim is approved, the technician completes repairs and the plan administrator pays the repair facility directly.
- You pay your deductible.
The standard deductible for vehicle service contracts is $100, though this can vary. Some providers offer $0 deductibles, and some deductibles are as high as $500. Plans with lower deductibles tend to cost more.
There are two types of vehicle service contracts: inclusionary and exclusionary. Inclusionary contracts cover repairs for select listed components. Exclusionary contracts list every component that isn’t covered. Exclusionary contracts tend to offer more complete warranty coverage.
The following components are excluded from most vehicle service contracts:
- Wear and tear items such as brake pads and brake shoes
- Wheels and tires
- Bumpers and body damage
- Wiper blades
- Catalytic converter
- Parts still covered under the manufacturer’s warranty
- Any covered part damaged by an uncovered part
- Routine maintenance
In addition to the exclusions listed above, most vehicle service contracts also come with a number of conditions in order to maintain coverage, such as:
- Service your vehicle in accordance with the manufacturer’s recommended maintenance schedule (at your own expense).
- Make reasonable efforts to protect your vehicle from additional damage after it breaks down.
- Use only ASE-Certified® mechanics.
In addition to providing reimbursement for covered repairs, most vehicle service contracts include a number of customer benefits. Specific benefits vary among companies but typically include:
- Rental car reimbursement
- Trip interruption coverage
- Roadside assistance
- Courtesy towing
How Much Do Vehicle Service Contracts Cost?
The cost of a vehicle service contract will depend on the following factors:
- Vehicle make and model
- Vehicle age
- Vehicle mileage
- Coverage level
- Coverage length
The newer your vehicle, the cheaper it will be to purchase coverage. Many extended car warranty providers will sell vehicle service contracts to customers before the factory warranty expires. This is generally the best way to lock in the lowest price.
In the course of our research, we have collected quotes from a large number of providers. We’ve found that, on average, a five-year bumper-to-bumper extended auto warranty costs around $3,500. The chart below provides price information from quotes we received from top providers for a 2017 Ford Explorer with 45,000 miles:
|Provider||Contract Term||Payment Plan||Down Payment||Deductible|
|Endurance||3 years/80,000 miles||$166.88 for 18 months||$178.10||$100.00|
|CARCHEX||5 years/100,000 miles||$202.89 for 18 months||First payment||$100.00|
|CarShield||Unlimited||$129.99 monthly||First payment||$100.00|
|Protect My Car||4 years/100,000 miles||$96.00 for 48 months||$99.00||$100.00|
How to Buy a Vehicle Service Contract
You can buy a vehicle service contract from a number of outlets. Virtually every dealership will sell manufacturer extended warranties and a couple of third-party options. Some banks and credit unions also sell vehicle service contracts to their customers. Lastly, you can always purchase contracts directly from a third-party provider.
Purchasing a contract is simple, and most come with 30-day money-back guarantees.
How to Avoid Scams
While quality vehicle service contracts will cover your vehicle’s repair bills, bad contracts can be a nightmare. Unfortunately, there are a number of scam companies that sell shoddy coverage to unsuspecting customers.
Following some of the tips below can help you to avoid scams. For more information, read our article on the worst extended car warranty companies.
|Don’t respond to mailers||A common tactic of fraudulent companies is to send out mailers designed to look as though they are from your dealership or manufacturer. No manufacturer will require you to purchase an extended warranty.|
|Take your time||Another tactic some scam warranty providers use is pressuring customers into purchasing coverage immediately. Companies may offer first-time caller discounts or tell you that you can only lock in a low price by purchasing immediately. High-pressure sales tactics are a red flag, and good companies don’t need to resort to them.|
|Read contracts||Always read your contract before providing payment information.|
|Do research||Learn about a company by searching online. Good companies have established profiles on websites like the Better Business Bureau (BBB) and large numbers of customer reviews on sites like Google and Trustpilot.|
|Trust your judgement||Trust what you know and don’t take a salesman’s word at face value. Verify information yourself and don’t assume just because a vehicle service contract is sold through your dealership that it is a quality product.|
|Consider manufacturer warranties||While manufacturer warranties are not always the best or cheapest option, they are typically reliable. For the most part, you can trust that a manufacturer warranty is legitimate.|
Can You Cancel Vehicle Service Contracts?
Any vehicle service contract worth its salt can be canceled. Most providers have a 30-day money-back guarantee policy. Virtually all contracts can be canceled for a prorated refund, though you may be required to pay a cancellation fee.
In our research, we’ve come across a number of customer complaints about having trouble canceling contracts from less reputable companies. It can be hard to get out of a contract if your provider is set on making cancellation difficult.
If you are having a hard time getting out of your extended warranty contract, try posting a complaint on the company’s BBB profile or on the Federal Trade Commission (FTC) or Federal Communications Commission (FCC) websites. These sites track consumer reports about fraudulent business practices. The FTC fines companies that are found to be in violation of customer service laws around phishing and scam tactics.
Top Recommendations for Vehicle Service Contracts
Once you’re ready to purchase a vehicle service contract, it’s time to start comparing quotes. Whether you’re buying a used car or your manufacturer’s warranty just expired, consider looking into options from three of our top recommended extended warranty providers: Endurance, CarShield and Protect My Car.
Endurance: Best Coverage
Endurance is a reputable car warranty company backed by over 15 years of industry experience.
Endurance offers a total of six levels of coverage. The first five are extended warranties with varying levels of coverage to protect against mechanical breakdowns. The last Endurance plan, EnduranceAdvantage™ is a combination between an extended auto warranty and a maintenance contract.
To learn if an Endurance car warranty is the best fit for you, use our tool below to get a free, customizable quote.
Endurance is our pick for best coverage with its comprehensive warranty options.
CarShield: Best Value
CarShield vehicle service contracts are available in every state except California and offer six levels of coverage. CarShield customers can even purchase extended warranty plans for motorcycles and all-terrain vehicles.
Compared to most other extended warranty providers, CarShield has one of the lowest monthly payment options for a bumper-to-bumper contract. CarShield also has excellent payment options for powertrain warranties. When we reached out for a quote in our CarShield review, we were offered the following terms for a 2013 Dodge Caravan with 88,000 miles:
|CarShield Extended Warranty Plan||Term Length||Monthly Payment||Down Payment||Deductible|
|Gold||4 years/48,000 miles||$78 for 18 months||$250||$100|
|Gold||4 years/48,000 miles||$63 for 24 months||$150||$100|
CarShield’s Gold plan covers powertrain components along with a few of your vehicle’s vital systems, like the fuel delivery system and air conditioning. It is a good option for high-mileage vehicles.
To see how much you would pay for coverage from CarShield, get a free quote.
Our research found this provider to be the most affordable. Plus, it offers monthly plans.
Protect My Car: Best Financing
Protect My Car offers financing options that extend as long as 60 months. This might mean a higher overall cost, but it can be a good option for those on a tighter budget. Protect My Car offers three levels of coverage ranging from a basic powertrain vehicle service contract to an exclusionary bumper-to-bumper contract.
In our Protect My Car review, we contacted the provider for a quote on a Ford Explorer with 45,000 miles and were offered the following:
|Protect My Car Extended Warranty Plan||Term Length||Monthly Payment||Down Payment||Deductible|
|Supreme||4 years/100,000 miles||$96/month for 48 months||$99||$100|
Protect My Car has been in the business for 14 years and has a strong customer reputation. To find out how much a Protect My Car vehicle service contract would cost you, use the buttons below.