You may have seen vehicle service contracts sold online or through dealerships, but are they worth it? Also called extended warranties, vehicle service contracts can cover mechanical repairs after a car’s factory warranty expires.
In this article, we’ll cover exactly how vehicle service contracts work and show you how to tell if a plan is or isn’t worth it. We’ve reviewed the best extended car warranty providers and recommend getting multiple quotes from industry leaders to find the best price. Start by checking out our top recommendations below.
Best for High-Mileage Cars
What Are Vehicle Service Contracts?
Auto dealers and independent warranty companies offer vehicle service contracts to cover mechanical repairs after a car’s factory warranty expires. Many plans come with extra perks like roadside assistance. Leading providers offer multiple plan options and allow drivers to visit any licensed facility for repairs, including dealerships and independent shops.
How Does a Vehicle Service Contract Work?
When you get a quote for a vehicle service contract, you’ll see that you can usually choose from a selection of coverage lengths, plans and deductibles. Coverage lengths are based on your car’s mileage and age. For example, a plan that covers up to 8 years/100,000 miles would expire when your vehicle exceeds either of these limits.
Vehicle service contracts can last a very long time. For example, leading providers can cover vehicles up to 200,000 or even 250,000 miles. Considering even the best new vehicle warranty only covers specific parts up to 100,000 miles, that’s a significant amount of coverage. Let’s take a look at a few standard coverage options next.
What a Vehicle Service Contract Covers
A vehicle service contract or extended warranty covers specific mechanical failures that are due to defective parts. The contract will outline every covered part, unless it’s an exclusionary contract. Exclusionary contracts are the opposite: They only list the parts that are not covered.
In the world of vehicle service contracts, you can find many different coverage plans. For the sake of simplicity, we’ll talk about three main types of coverage: bumper-to-bumper, powertrain plus and powertrain coverage. Keep in mind that there may be coverage levels offered in between these plans as well.
- Bumper-to-bumper: As an exclusionary contract, this plan covers any mechanical breakdown except for a list of excluded parts.
- Powertrain plus: This plan covers the engine, transmission and drive axle, plus other important systems like the steering, electrical, brakes, air conditioning and fuel systems.
- Powertrain: This plan covers the bare essentials of your vehicle. It includes parts of the engine, transmission and drive axles. It also usually includes turbochargers.
A bumper-to-bumper extended warranty is also called comprehensive coverage, but not even this plan covers everything. Here are a few example exclusions:
- Wear-and-tear parts like brake pads and hoses
- Damage from lack of maintenance or misuse
- Routine maintenance services
- Damage from the environment or a collision
- Cosmetic parts and accessories
- Pre-existing conditions
- Any repair done without prior authorization from the contract administrator
- The bumpers themselves
Dealership vs. Third-Party Vehicle Service Contracts
Dealerships and manufacturers offer extended warranties, and it may seem tempting just to add a plan when you purchase a new car and roll the cost into your loan. However, there are a few differences between dealer- or manufacturer-backed extended warranties and third-party vehicle service contracts:
|Manufacturer-Backed Plan||Third-Party Plan|
|Choice of Mechanic||Repairs typically must be made|
at a dealership.
|Repairs can be made|
at any licensed repair facility.
|Plan Options||Manufacturers may offer one or|
two coverage plans, but rarely more.
|Leading third-party providers offer|
up to six coverage options.
|Price||Manufacturer-backed plans are typically more expensive,|
but you can roll the cost into your auto loan.
|Third-party plans are usually cheaper,|
and most offer zero-interest payment plans.
|Purchase Limitations||Manufacturers generally require you|
to purchase a plan when you buy the vehicle or before your factory warranty expires.
|You can buy independent providers’ plans|
at any point in the life of your vehicle.
|Term Limits||Most manufacturer-backed vehicle service contracts will cover up to 100,000 miles,|
and some reach up to 150,000 miles.
|Third-party plans can cover|
up to 250,000 miles.
Some independent dealerships may also sell their own vehicle service contracts through third-party providers. Often, these providers only operate through dealerships, so they don’t offer sample contracts online, and customer reviews are hard to find. Some contracts may require you to visit that specific dealership for repairs as well.
Can You Cancel a Vehicle Service Contract?
Yes, you can cancel a vehicle service contract. However, different companies offer different refund guarantees. For example, one provider might allow you to get a full refund if you cancel within 30 days, while another might give a full refund within 60 days.
You won’t be able to get a full refund if you’ve used the warranty coverage, of course. And if you cancel after the guarantee period, you’ll get a prorated refund based on time and mileage.
What Is the Difference Between a Warranty and a Service Contract?
Technically, the only entity that can offer a warranty (or extended warranty) is the manufacturer itself.
For example, every Cadillac comes with a warranty from the factory. If you want to get the official extended warranty, you can purchase a Cadillac Extended Limited Warranty, which extended new vehicle coverage from 4 years/50,000 miles to 6 years/70,000 miles and is administered by General Motors (GM).
There is also a Cadillac Platinum Protection Plan, which is technically a vehicle service contract and that can last up to an additional 5 years/60,000 miles. Many manufacturer-backed extended warranties are vehicle service contracts. Companies market them as extended warranties because they serve the same function.
Vehicle service contracts cover mechanical repairs and can also come with extra perks like roadside assistance and rental car coverage. The only difference is that another company is paying for the covered repairs, not the vehicle manufacturer.
How Much Do Vehicle Service Contracts Cost?
Vehicle service contract prices are based on your car, so companies require you to get a quote for individual pricing. Costs are influenced by a few factors, including:
- Vehicle make and model: Different vehicles have different average repair costs. For example, it usually costs more to repair or replace parts on a Volkswagen than a Toyota, and extended warranty prices reflect that.
- Vehicle year and mileage: If your car is older or has many miles on it, it has a higher likelihood of needing repairs. That means extended warranties will cost more.
- Deductible: Choosing to pay a higher deductible for repairs will also lower your total cost. You can usually choose a deductible between $0 and $250.
We received quotes from a number of providers in our industry research. Overall, the average total cost for an extended warranty is $2,708. The average cost per year for a bumper-to-bumper plan is $489, and the average cost per year for a powertrain plan is $649. Bumper-to-bumper plans cost slightly less than powertrain plans because the vehicles that qualify for them are newer and less prone to repairs.
Is a Vehicle Service Contract Worth It?
There are many reasons why a vehicle service contract can be worth it. For example, they can be a good idea if you don’t have a sizable savings account to cover emergency car repairs. However, you ultimately have to make the decision for yourself.
Instead of having to pay for an emergency repair all at once, you can make a monthly payment for the contract. This can help you predict your budget with more accuracy. Interestingly, 62% of drivers in a recent PegaSystems Inc. survey reported using their warranties in 2018.
Of course, there is the chance that you wouldn’t need to use the full amount of the warranty for auto repairs. If you do have savings and are prepared to cover a $1,000 repair bill yourself, a vehicle service contract might not be the best option for you.
Top Recommendations for Extended Car Warranties
You have dozens of options for extended warranties today. To find the best deal on a vehicle service contract, we recommend getting multiple quotes from reputable extended car warranty companies. That way, you can compare the coverage options and prices that are available to you. Our top recommendations include Endurance and CarShield.
Endurance: Best Provider
After reviewing many leading extended warranty providers, we found that Endurance offers the best coverage overall. Drivers can choose from six plans that range from basic to comprehensive coverage and can last up to 200,000+ miles.
Also, Endurance plans come with a number of extra benefits including roadside assistance, concierge services, tire replacements and more. Looking at several quotes we received, Endurance offers affordable coverage compared to many other companies as well.
Learn more about this provider in our Endurance warranty review, or click below for a free, no-obligation quote.
CarShield: Most Affordable
If you’re trying to stay under a certain budget, CarShield is a great provider to check out. In our CarShield review, we found the provider offered the best prices compared to the other quotes we received.
With CarShield, you can choose from six coverage options, including specialty plans for high-tech and off-road vehicles. CarShield plans can also cover up to 200,000 miles, and they come with extras like roadside assistance and trip interruption coverage.
To get a free quote from CarShield, click below.