A vehicle service contract is a paid plan that helps to cover costly car repairs and takes effect once the new vehicle warranty has expired. Often called an extended car warranty, a vehicle service contract can be purchased for both new and used cars, though the likelihood of repairs increases as your vehicle begins to age.
You can use vehicle service contracts whenever your vehicle needs a repair that’s covered by your contract. Remember that all vehicle service contract providers offer multiple levels of coverage, so not every service contract will cover every repair.
Difference Between Factory Warranties And Extended Warranties
There are subtle differences between vehicle service contracts and extended warranties, even if the two are mostly the same. The key difference is that service contracts do not literally extend a manufacturer’s warranty – only the automaker can do that. Instead, they mirror the factory warranty coverage and sometimes provide additional protection as well.
What Does A Vehicle Service Contract Cover?
Vehicle service contracts can cover just the powertrain (engine, transmission, and drive axle) or almost anything a factory warranty covers. Plans can include air conditioning, electrical, steering, braking, suspension, fuel systems, and more.
If you want to be completely covered, you’ll probably want to purchase a contract that offers exclusionary coverage. That means the contract covers everything except the parts specifically listed as exclusions.
When purchasing a vehicle service contract, it’s important to read the fine print very carefully. Most contracts will specifically list all the parts that are covered. However, exclusionary contracts do the opposite, covering everything except the listed parts.
What Is Not Covered Under Extended Warranties?
That said, even parts that appear to be covered by a contract won’t always get protection. Many contracts specifically state that they only apply to mechanical breakdowns and exclude repairs due to wear and tear. That means you’ll have to foot the repair bill if one of your covered components breaks for any reason other than the one specified in the contract.
Some providers may also deny coverage if a noncovered part damages a covered part. At times, diagnostics are required to figure out what’s wrong with your vehicle. Even if the policy covers actual damages, you’ll be required to pay for the vehicle diagnostics.
Warranty exclusions can be complicated, so it’s vital that you carefully read through the jargon to ensure that you understand what you’re getting yourself into.