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Vehicle Service Contracts 101

Vehicle Service Contract Research

Extended Auto Warranty vs. Vehicle Service Contract

An "extended auto warranty" is a contract offered by a new car dealer to "wrap" the new car factory warranty and extend beyond it. A vehicle service contract is sometimes incorrectly referred to as an "auto warranty" or "extended auto warranty" if sold outside of a new vehicle purchase. The difference is subtle but important. Auto warranties are provided by a manufacturer and are included with the original vehicle purchase. Extended auto warranties are sold separately by dealers to wrap and extend beyond the manufacturer warranty coverage. Vehicle service contracts can be purchased at any time - although the earlier you purchase a vehicle service contract in the life of the vehicle, the better coverage you can usually obtain.

What does a Vehicle Service Contract cover?

Vehicle service contracts are designed to protect consumers and their pocketbooks against unexpected, costly repairs to their vehicles. Unlike vehicle insurance designed to cover you and your vehicle in case of an accident, vehicle service contracts cover necessary automotive repairs when covered breakdowns or failures occur. Vehicle service contracts cover costs including parts, labor, and sales tax for covered repairs or replacements. Because each service contract is different, it's important that potential buyers review any contract carefully prior to purchase.

What should I look for when purchasing a Vehicle Service Contract?

It's important to choose vehicle service contract coverage that fits your budget - without sacrificing quality service. Administrators act as claims adjusters, authorizing the payment of claims to the repair facility - so make sure they have the financial resources to meet their obligations under the contract. After all, the ultimate measure of an administrative company is ensuring that your claims are paid quickly and easily.

What does the industry say about Vehicle Service Contracts?

  • Edmunds Warranty Advice

    Edmunds.com

    A service contract can be purchased at the time you buy your vehicle, though it's also possible to purchase one much further along in your ownership experience. If you're the type who likes to be prepared for all eventualities, a vehicle service contract may be just what you're looking for. Read full article.
  • CNN Warranty Advice

    CNN.com

    If you keep a vehicle beyond its warranty period, than I highly recommend a vehicle service contract. Consider the cost of repairs. The average transmission replacement is around $2,500. Engines cost in the neighborhood of $4,000. In-vehicle electronics can cost a small fortune. Be smart and get a vehicle service contract on a vehicle if you are going to keep it beyond the factory or dealer warranty. Read full article.
  • SCIC Warranty Advice

    SCIC (Service Contract Industry Council

    Service contracts for vehicles such as cars, trucks, RVs, ATVs and motorcycles are an efficient way for consumers to protect their purchase and experience peace of mind when the manufacturer's warranty expires. Read full article.
  • FTC Warranty Advice

    Federal Trade Commission

    A service contract can be purchased at the time you buy your vehicle, though it's also possible to purchase one much further along in your ownership experience. If you're the type who likes to be prepared for all eventualities, a vehicle service contract may be just what you're looking for. Read full article (PDF).
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