Vehicle Service Contracts: 2024 Guide

Stephen Kenney
by Stephen Kenney

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.


Highlights:

  • After a manufacturer's warranty expires, you can purchase a vehicle service contract to cover the cost of repairs for certain components.
  • It's best to shop around and get multiple quotes to find the best extended auto warranty for your needs.
  • Our team rated Endurance, Carshield, and CARCHEX as three of the top vehicle service contract providers.

What Is a Vehicle Service Contract?

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.

Are Vehicle Service Contracts Worth It?

A vehicle service contract can be worth it if it fits your needs. 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.

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

Deductibles

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.

What Does a Vehicle Service Contract Cover?

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
  • Upholstery
  • Bumpers and body damage
  • Glass
  • Wiper blades
  • Catalytic converter
  • Parts still covered under the manufacturer’s warranty
  • Any covered part damaged by an uncovered part
  • Routine maintenance

Conditions of a Vehicle Service Contract

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

Benefits of a Vehicle Service Contract

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

Vehicle Service Contracts Cost

In the course of our research, we have collected quotes from dozens of providers. We’ve found that, on average, a five-year bumper-to-bumper extended auto warranty costs around $3,500 in tota. 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

$130 for 30 months

N/A

$100.00

CARCHEX

5 years/100,000 miles

$175 for 18 months

1 month

$100.00

CarShield

Unlimited

$99.99 monthly

1 month

$100.00

The cost of a vehicle service contract will depend on the following factors:

  • Vehicle make and model
  • Vehicle age
  • Vehicle mileage
  • Deductible
  • 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.

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. 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.

Vehicle Service Contract 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 salesperson’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.

Vehicle Service Contract Cancellation

Any vehicle service contract from a reputable warranty provider will have a 30-day money-back guarantee. 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.

Vehicle Service Contracts: Conclusion

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 and CarShield.

Best Vehicle Service Contracts

Below are some of the best vehicle service contracts in the industry:


Endurance: Best Coverage

Our rating: 4.6 out of 5.0


Endurance is our pick for best coverage with its comprehensive warranty options. 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, consider reaching out for a free quote.


Get Quote

CarShield: Best Value

Our rating: 4.5 out of 5.0


Our research found this provider to be the most affordable, and it offers monthly plans. 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. 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.


Read more about coverage from CarShield in our comprehensive CarShield review.

Get Quote

Methodology

Our review team prides itself on sharing accurate and unbiased information with consumers. We have accumulated data from dozens of extended auto warranty companies to formulate our rankings of the industry’s best providers. Companies receive a score out of 5.0 overall, as well as a rating in each of the following categories:
  • Price: Comparing providers can be difficult due to the many factors that influence cost. To determine this score, we employ a secret shopper analysis using different vehicles, mileages, warranty plans, and locations.
  • Coverage: A wide variety of coverage is essential to support the differing needs of customers. We take into account the number of extended car warranty plans available, term limits, exclusions, and additional benefits.
  • Customer Service: The level of customer service and care provided by an extended warranty company is an important consideration. Our review team sifts through customer reviews and complaints from reputable sources such as the Better Business Bureau (BBB) and Trustpilot. We also consider the responsiveness of each company’s customer service team based on our secret shopper analysis.
  • Reputation: Good extended warranty providers consistently provide quality experiences. Our team takes into account BBB ratings and the company’s history of reliable service when giving this score.
  • Transparency: Customers value a commitment to open and honest communication when it comes to vehicle service contracts. Our team of experts takes into account the availability of money-back guarantees and sample contracts.

Q & A: Vehicle Service Contracts

Here are some frequently asked questions about vehicle service contracts:


How much should I pay for a vehicle service contract?

What you pay for an auto service contract depends on the type of coverage you are looking for and the deductible you are willing to pay. Our 2021 extended warranty survey, which polled 1,000 people, found that 45 percent of respondents paid between $1,500 and $2,500 for coverage.


What are the benefits of a vehicle service contract?

Purchasing a coverage plan can give you peace of mind in case your vehicle breaks down. Most contracts cover the essential parts of your car, which can save you thousands of dollars in the long term. Some plans even include maintenance, which pays for oil changes and wear and tear.


What are the two types of vehicle service contracts?

Two types of vehicle service contracts are powertrain warranties and bumper-to-bumper warranties. Powertrain warranties cover your vehicle’s most essential parts including your engine, transmission, and drive axle. Bumper-to-bumper warranties protect most components of your vehicle from end to end. It’s important to always read the fine print to see what is covered specifically under each warranty.

Stephen Kenney
Stephen Kenney

Stephen Kenney is a writer and editor who focuses on car insurance, auto financing, and vehicle shipping services. He's a graduate of UNC-Chapel Hill and has experience covering categories ranging from travel to sports to environmental sustainability. In his free time, Stephen enjoys going on long-distance runs, trying out new recipes, and exploring his adopted hometown of Cincinnati.

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