If unexpected repair costs give you motion sickness, you may want to consider a vehicle service contract.
When you buy a new car, you’re typically covered against mechanical breakdowns under the manufacturer’s warranty for a few years. However, most vehicle owners keep their cars long after the manufacturer’s warranty expires, meaning they eventually need to start footing their own repair bills if something goes wrong.
While this doesn’t bother all car owners, many motorists prefer to have the peace of mind that vehicle service contracts provide – assuming you have a reputable provider, that is. A vehicle service contract acts like an insurance policy: You pay up front, and if your car ever needs any covered repairs, your provider will foot the bill. In this way, you don’t have to worry about any sudden and unexpected repair or replacement costs, because everything is included in your premium.
Here, we’ll give you an overview of vehicle service contracts – what they are, how to use them, if they’re worth it, and who the best providers are. By the end, you’ll be on your way to making an educated decision about whether vehicle service contracts are right for you.
To help cut through the noise, we reviewed the top extended car warranty providers and ranked them on things like customer service, business reputation, coverage options, and perks. The following providers rose to the top of our list – and you can use the tool below to get a free, customized quote from each:
In this article:
- What Is A Vehicle Service Contract?
- How To Use Vehicle Service Contracts
- How Much Do Vehicle Service Contracts Cost?
- Are Vehicle Service Contracts Worth It?
- Where Can You Buy Vehicle Service Contracts?
- The Best Vehicle Service Contract Providers
What Is A Vehicle Service Contract?
A vehicle service contract is a paid plan that helps cover costly car repairs and takes effect once the manufacturer's warranty has expired. Often called an extended car warranty, a vehicle service contracts can cover both new or used cars, but as the car ages, the likelihood of it needing repairs rises.
However, there are subtle differences between vehicle service contracts and extended warranties, even if they are the same for the most part. The key difference is that service contracts do not literally extend a manufacturer’s warranty – only the manufacturer can do that. Instead, they mimic the factory warranty coverage. Sometimes, they provide additional coverage that isn’t included in the manufacturer’s warranty.
You may not end up using it, but if a major component of your car breaks and you don’t have coverage, you can easily start regretting your decision not to pick one up. Keep in mind, though, that not all vehicle service contracts are made equal, so be sure to check out our guide to the best extended car warranties if you haven’t yet.
Some companies make it so difficult to get a claim covered that you’d probably be willing to pay just to not have to deal with the provider. But when you purchase a vehicle service contract from a reputable business, you may find that the peace of mind it offers not only eases your worries about your car’s condition, but also helps you budget more easily – as your maximum car repair costs could be much more than the price of the vehicle service contract.
How To Use Vehicle Service Contracts
You can use vehicle service contracts anytime your vehicle needs a repair that’s covered by your contract. Bear in mind that all vehicle service contract providers offer multiple levels of coverage, so not every service contract will cover every repair. If you want to be completely covered, you’ll probably want to take out a contract that offers exclusionary coverage. This means the contract covers everything except the parts that are listed as exclusions in the contract.
Each provider will also have their own process as to how claims are filed and ultimately covered. Some providers require you to pay the repair facility upfront, after which they’ll reimburse you, while others deal with the repair facility from the get-go and pay them directly, meaning you rarely have to spend a dollar out of your pocket for costly repairs.
How Much Do Vehicle Service Contracts Cost?
There is no one set price for vehicle service contracts. The cost of your contract will depend on the make, model, year, and condition of your car, as well as the level of coverage and term length of your contract. Just like an insurance policy, the more risky your car is to the provider (i.e. likely to need repairs), the more you’ll need to pay for a contract.
A typical contract can cost anywhere from a few hundred dollars to $1,000. However, on average, most vehicle service contracts cost somewhere between $350 to $700 per year. Before purchasing a vehicle service contract, you should consider how much you would plan to spend on repairs without one to determine whether it would make financial sense for you.
Common Exclusions In Vehicle Service Contracts
When purchasing a vehicle service contract, it’s important to read the contract very carefully. Most contracts will specifically list all the parts that are covered. However, exclusionary contracts do the opposite, covering everything except the parts that are listed.
That said, even parts that appear to be covered by a contract won’t always be covered like you’d hoped. Many contracts specifically state that they only apply to mechanical breakdowns and exclude repairs due to wear and tear. This means that even if one of your covered components breaks for any reason other than the one specified in the contract, you’ll have to foot the repair bill.
Some providers may also deny you coverage if an excluded part breaks and then damages another part that’s supposed to be included in your coverage. Sometimes, diagnostics are required to figure out what’s wrong with your vehicle, and even if the actual damage is covered by the policy, the diagnostics are not, so you’ll be required to pay for those.
Clearly, exclusions are very complicated, so it’s vital that you carefully read through all the jargon to ensure that you understand what you’re getting yourself into before purchasing a service contract.
Are Vehicle Service Contracts Worth It?
Vehicle service contracts can be worth the money, especially for used vehicles, if you purchase from a reputable brand and value having some peace of mind, even if your service contract doesn’t end up saving you any money. For some people, the mere knowledge that they have a clearly defined limit on how much they will spend on repairs is more important than saving money on the actual repairs. For others, the contracts will come in handy and can end up saving those customers a few hundred or thousand dollars.
Whether a vehicle service contract is worth it is entirely dependent on the company you’re buying from, how much you’re paying, what’s covered, and the condition of your vehicle. Remember, it’s not uncommon these days for motorists to put over 150,000 miles on their cars during their vehicle’s lifetime, so if you plan to hold onto your car for a while, a vehicle service contract may be worth looking into.
Where Can You Buy Vehicle Service Contracts?
Motorists can purchase vehicle service contracts from dealers and from third-party providers. Let’s take a quick look at the differences.
The advantage of purchasing an auto service contract from a dealer is that you’ll always get genuine replacement parts from your manufacturer when one of your car repairs is covered. However, on the flip side, you’ll also be limited to servicing your vehicle at one of your manufacturer’s authorized service centers. Don’t plan to bring your car to your favorite auto body shop and still receive coverage.
Third-party service contract providers act completely independently of your manufacturer. This brings some risk along with them: Unlike buying an extended warranty from Ford or Hyundai, you need to research a third-party provider to make sure the company is trustworthy.
However, vetting third-party providers doesn’t take long (we’ve already done it for you in this article), and if you do find a provider you like, you often have far more flexibility regarding your repairs. Endurance, for example, has a gigantic network of service providers across the United States, so it’s much more likely that you can get your car repaired at your favorite local store and still be covered.
The Best Vehicle Service Contract Providers
We’ve sorted through the best and worst providers, and a few companies that came out at the very top. Let’s take a look at what makes them great, all of which offer additional coverage, such as roadside assistance, towing services, and rental car reimbursement.
Endurance: Best Coverage
Overall, the highest-ranking extended warranty company we reviewed is Endurance, which also scored highest in coverage options.
Unlike most extended warranty companies that work as brokers between customers and various plan providers, Endurance directly administers its warranty plans and is involved at every step of the claim process. The company’s one-stop-shop service speeds up claims and offers peace of mind knowing you have only one company to contact if you need assistance.
The coverage options offered by Endurance are comprehensive and account for different ranges in price and protection. Plans are offered with up to 8 years/200,000+ miles of protection.
- Select Premier coverage: Endurance’s plan for high-mileage vehicles, the warranty has a fairly extensive inclusion list that focuses on the powertrain.
- Secure coverage: Endurance’s most basic auto warranty only covers parts of the powertrain, meaning the engine, transmission, and drivetrain.
- Secure Plus coverage: This mid-level warranty provides the shortest wait time out of all the plans. The waiting period for coverage is only 30 days or 1,000 miles.
- Superior coverage: This high-tier comprehensive plan provides great coverage for hundreds of listed parts throughout the vehicle.
- Supreme coverage: This top-tier plan is Endurance's exclusionary, bumper-to-bumper warranty. It includes coverage for most parts with only some exclusions.
- EnduranceAdvantage™: This plan covers mechanical breakdowns as well as maintenance, like oil changes, engine diagnostics, and brake pad replacements.
Unlike some dealership extended warranties, many Endurance contracts don’t charge a deductible, nor do they require you to visit a specific dealership. You are free to choose any repair shop you like, and are only required to pay a monthly payment that fits your budget.
CARCHEX: Best For Used Cars
CARCHEX has been in business for over 20 years now and maintains an A+ rating with the Better Business Bureau (BBB). It has been endorsed by major brands like Edmunds.com, Kelley Blue Book, and CARFAX and has received numerous recognitions, including:
- Thoroughly Reviewed 2017 Top Pick
- A five-star rating on TopConsumerReviews.org for six years in a row
- The BestReviewsHub.com Best Choice Award for four years in a row
CARCHEX always makes its customers’ satisfaction a top priority. It guarantees that calling in for a quote won’t put you on the line with a high-pressure salesperson. When you call, CARCHEX will put you in contact with someone who can help you make sense of the plans, which is helpful because, like all legal documents, the contracts can be confusing.
Out of all the vehicle service contract providers we reviewed, Endurance is the one we recommend the most highly. In fact, we named it Best Coverage for its large repair network, great customer service, the fact that it deals directly with the repair facility, and the number of different coverage options it provides, ranging from a powertrain warranty to a bumper-to-bumper warranty.
While we recommend Endurance, we urge you to get quotes from several different warranty providers to make sure you get the right coverage at the best price. It's always a good idea to ask for a sample contract so you can read the fine print and better understand what parts are covered and what is considered normal wear.
Read our guides to other warranty providers: