The terms extended car warranty or auto warranty are sometimes used interchangeably with vehicle service contracts. Though they both protect you from costly mechanical problems, warranties and car service contracts are different.
In this article, we’ve defined each policy and highlighted some of the advantages and disadvantages. We hope to clarify the distinctions between a vehicle service contract and an auto warranty with the information below.
What is an auto warranty?
An auto warranty is a guarantee issued by a manufacturer or dealer to cover repairs and defects of your vehicle for a specific time and mileage. Dealers and manufacturers sell auto warranties, and a third party cannot provide these. Most standard warranties cover repairs for three years or 36,000 miles, whichever comes first. On the other hand, some comprehensive coverage warranties can last up to ten years or 100,000 miles.
Some extended warranty packages begin coverage at the vehicle’s first in-service date, while others begin coverage at purchase. Auto warranty coverage may differ in terms of what is covered, and you may be required to pay a deductible, all of which will be explained in detail in the fine print of the contract.
If you want coverage beyond the standard warranty, an extended auto warranty is the way to go. It’s important to remember that warranties aren’t only for new vehicles. Warranties could also be available on buying a used car; thus, check with your seller or the manufacturer.
What’s covered in the auto warranty?
The following are examples of common forms of coverage:
- Bumper to bumper warranty: Repairs flaws in factory-installed parts are covered.
- Roadside assistance: Covers towing, tire replacements, and accidental damages if there’s any auto accidentor your vehicle breaks down on the road.
- Drivetrain/powertrain warranty: Covers engine, transmission, and transaxle components; often lasts longer than bumper-to-bumper warranty.
- Warranty against rust or corrosion: Covers rust on the car’s sheet metal.
There are various auto warranty companies available in the market. Before purchasing one, inquire about specifications and read the fine print. It’s possible that the parts that are most prone to fail or wear out aren’t protected.
| Benefits | Shortcomings |
| Included with buying cost of your vehicle | There may be exclusions to your warranty |
| It covers significant parts, such as engine, transmission, etc | Your car’s age could be a limitation |
Note: If you are leasing your car for longer periods, you might need an auto warranty for protection against breakdowns.
What is a vehicle service contract?
A vehicle service contract pays for any repairs to items mentioned as covered in your plan. A car service contract can be used for a variety of purposes. It can either enhance the coverage offered by your auto warranty, filling in any gaps that the original warranty may have, or it can replace your expired auto warranty.
The cost of a service contract is typically determined by the car’s make, model, and condition. Read your contract to find out if the deductible is required when your vehicle is serviced or repaired or after. Finally, some contracts impose fees if you sell your vehicle, transfer the contract to a new owner, and terminate the contract. You should know about those.
What’s covered in a vehicle service contract?
Service contracts are similar to auto warranties in terms of coverage duration, such as number of months or miles, covered items, like engine, light, or transmission repairs. The service contract covers the balance of the repair expenses after you pay a deductible.
However, coverage differs depending on the provider and contract, so check the fine print before signing up. Typical exclusions are:
- Common repairs of parts like brakes and clutches
- Towing or rental car expenses
- Normal wear and tear
- Adjustments and tune-ups
| BENEFITS | SHORTCOMINGS |
| If your car is stopped on the roadside, your vehicle service contract may include the option of sending a tow truck or assisting with a flat tire replacement. | You will have to budget your money for monthly premiums. |
| It may cover repairs to minor components. | You may never use it if the car works great. |
Note: If you own a luxury vehicle, a service contract may enhance its protection, but for minimum repairs you will have to follow proper maintenance procedures.
Conclusion
So, are service contracts and warranties worth the money? It depends on the plan you select. However, if you decide to buy one (or both), be sure you understand precisely what you’re getting and all of the fine print.