Why Do I Need a Vehicle Service Contract? How Service Contracts Work, and Best Practices

What is a Vehicle Service Contract?

A vehicle service contract is an optional plan from a third-party company that covers specific repairs and breakdowns after your factory warranty expires. It is similar to a warranty in that it is an agreement to cover the cost of repairs for certain components. Vehicle service contracts can provide coverage for both new and used cars, though the likelihood of repairs increases as the vehicle ages. These plans can be categorized as either inclusionary or exclusionary contracts, with most contracts covering a range of fixes to suit customers’ needs. However, vehicle service contracts usually do not cover damage to tires or wheels, upholstery, regular wear and tear, deteriorated brake pads, and broken glass. Vehicle service contracts are often the right option for car owners as they offer long-term and high-mileage plans that help protect them from unexpected repair expenses beyond most manufacturer warranties.

Why Do You Need a Vehicle Service Contract?

1. Protection against costly repairs

A vehicle service contract can help protect against costly repairs by providing coverage for mechanical breakdowns and unexpected repair bills. This type of contract also offers perks such as roadside assistance, rental car reimbursement, and protection for high-tech components, which can be extremely expensive to repair. Additionally, the cost of one major repair after a mechanical breakdown is often higher than the lifetime cost of a vehicle service contract, making it an effective and cost-efficient way to protect against costly repairs.

2. Peace of Mind

The peace of mind benefit of a vehicle service contract is the assurance that you can have unplanned repair costs covered without having to worry about significant out-of-pocket expenses. EasyCare’s Vehicle Service Contract offers four levels of coverage to suit your individual budget and driving habits, so you can protect your investment and increase your trade-in value. Not only that, it may even cover some expenses that the manufacturer’s warranty doesn’t, which makes it an attractive option for car owners who can’t afford expensive car repairs.

3. Coverage of Major Components

Vehicle service contracts typically provide coverage for major components such as the engine, transmission, drive axle, steering, brakes, suspension, air conditioning, electrical components, fuel system, cooling system, and factory navigation. There are four main types of warranties for cars: exclusionary, stated coverage, powertrain, and wrap. Exclusionary plans offer the most comprehensive coverage and cover all components unless they are explicitly excluded in the contract. Stated component plans are the second most comprehensive and list what is covered in the contract. Powertrain plans cover the engine, transmission, and drive axle, and some plans may also include other select components. Wrap plans cover everything excluded in a powertrain and have a list of exclusions.

4. Coverage of Maintenance and Repairs

A vehicle service contract typically covers mechanical repairs that occur post-warranty, such as transmissions, air conditioners, and engines. It may also provide a loaner vehicle during the repair period and cover some regular scheduled maintenance such as oil changes and system inspections. However, it is important to note that these contracts often do not cover everyday issues such as upholstery damage, tire damage, or regular wear and tear, as well as pre-existing issues, tires, wheels, and rims, paint, glass, or upholstery, damage resulting from accidents or environmental events, and routine maintenance services.

5. Extended Warranty on the Vehicle

The purpose of an extended warranty on a vehicle is to provide coverage for unexpected car repairs after the expiration of the original manufacturer’s warranty. A vehicle service contract – also known as an extended auto warranty, vehicle protection plan, or extended service contract – is a plan that pays for mechanical repairs and other costs related to the repair of a vehicle. These plans often come in the form of manufacturer-extended warranties, which have limited options and must be purchased at the time of vehicle purchase. Third-party warranty companies may also offer extended warranties with more coverage options and flexibility. Regardless of the type of plan chosen, extended warranties help cover the cost of expensive repairs and provide peace of mind while driving.

6. Savings on Repairs

A vehicle service contract can help to save money on repairs by providing coverage for the costs of unexpected repairs and maintenance beyond what the manufacturer’s warranty covers. The cost of one major repair after a mechanical breakdown is often higher than the lifetime cost of a vehicle service contract, so the contract can help to offset those costs. Furthermore, many contracts come with additional perks like car rental reimbursement, roadside assistance and towing, which can help to save even more money in the long run.

7. Convenience of Doing Everything Online

Having a vehicle service contract makes it easier to do everything online because it provides drivers with the peace of mind that their maintenance costs will be covered should an issue arise. This eliminates the need for drivers to worry about unexpected repair bills, and allows them to shop for the best deal on their vehicle service contract with confidence. Furthermore, many providers offer free 7-day returns, 30-day warranties, and no-contact test drives, helping drivers make an informed decision and purchase the best option for their needs. By taking the time to research coverage plans, frequently asked questions, and read customer testimonials, drivers can ensure that the vehicle service contract they choose is the best fit for them.

8. Protection from Manufacturer Defects

A vehicle service contract provides protection from manufacturer defects by extending the coverage period of the factory warranty, typically for up to 250,000 miles. It covers mechanical and electrical problems, and includes flexible coverage options that allow you to choose your own repair shop. Additionally, the contract will not be voided if aftermarket or recycled parts are used or if the repairs or maintenance are done by someone other than the dealer. However, if an aftermarket or recycled part is defective or not properly installed, it could damage another part that is covered under the warranty, and the manufacturer or dealer could deny coverage for that part and charge for repairs. To avoid this, it is important to keep all service records, regardless of who does the service, and have any needed repairs done in a timely manner.

9. Benefit of 24/7 Roadside Assistance

A vehicle service contract with 24/7 roadside assistance offers a variety of benefits, such as fuel deliveries, lockout assistance, battery jump-starts, winching, towing to the nearest dealership or authorized repair facility, reimbursement for alternative transportation, like a rental car, reimbursement for food and lodging up to a certain dollar amount if a mechanical breakdown occurs while you’re far from home, road hazard protection, and emergency roadside assistance and towing.

10. Knowledge of Quality Plans

A vehicle service contract provides additional protection to drivers and can help with quality plans by offering a wide network of approved repair shops, as well as a variety of budget and coverage levels to suit their needs. Through proper research, it is possible to find well-established and well-reviewed companies, as well as potential discounts or sales that could help save more money. Additionally, reading the fine print is essential to make sure the policy covers the components drivers are looking for. It is also beneficial to take the policy to a trusted mechanic to look over it in case there are unexpected repairs. Finally, drivers can seek out personalized quotes from recommended providers in order to compare plans with multiple quotes.

How Vehicle Service Contracts Work

Vehicle service contracts, also known as extended warranties, are agreements that cover costly car repairs once the new vehicle warranty has expired. They can be purchased for both new and used cars, and are offered by automakers, dealers, insurance companies, and independent firms with administrators.

Vehicle service contracts typically fall into two categories: inclusionary and exclusionary. Inclusionary contracts cover repairs for components that are limited to a predetermined list of items, while exclusionary contracts provide coverage for everything outside of a predetermined list of items. Things that are typically not covered include damage to the tires or wheels, damaged upholstery, regular wear and tear, deteriorated brake pads, and broken glass.

The cost of a vehicle service contract varies widely across the industry, and the length of the contract is often negotiable. When considering this additional expense, customers should think carefully about their needs, maintenance habits, and how long they plan to own the vehicle.

Vehicle service contracts are a great option for car owners as they offer long-term and high-mileage plans to protect from unexpected repair expenses beyond most manufacturer warranties. Additionally, they may help lower maintenance costs and provide coverage for vehicle repairs that would otherwise fall outside of the manufacturer’s warranty. However, customers should be aware of the conditions that must be met in order to maintain coverage, such as servicing the vehicle in accordance with the manufacturer’s recommended maintenance schedule, making reasonable efforts to protect the car from additional damage, and using only ASE-Certified mechanics.

Best Practices for the use of Vehicle Service Contracts

1. Check your vehicle’s warranty coverage.

When investing in a vehicle service contract, it is important to thoroughly research the company and check the warranty coverage to ensure that you are protected. The coverage should be comprehensive and cover all the components you need. It is also important to read the fine print to understand what is covered and what is excluded, and to make sure that the coverage is transferable if you decide to sell the vehicle. Additionally, you can ask for discounts or sales if available, which can help you save money on the contract. Knowing exactly what you are getting into and understanding the coverage can help you avoid costly repairs down the line.

2. Research the best service contract providers.

Step 1: Research the Company: Proper research is a must. Look to places like Consumer Reports or the Better Business Bureau (BBB) to get a better understanding of the vehicle service or third-party warranty companies. Additionally, look to the provider’s website to find out more about their coverage plans and additional benefits.

Step 2: Ask for Discounts: See if there are any available discounts or sales for the policy. Many providers may have sales during certain holidays. Be upfront with the policy salesperson as most trusted providers can help you craft a policy to fit your needs and budget.

Step 3: Read the Fine Print: Go over your policy very closely and take it to a trusted mechanic for a second opinion, just in case. Make sure that you understand what your policy covers and does not cover to avoid any unexpected repair bills.

3. Compare service contract plans

Comparing vehicle service contract plans can be a great way to save money, but it can be tricky. Here is a step-by-step guide to help you compare the different plans:

1. Start by assessing how much coverage you need. Determine which parts of your vehicle you want to cover and how much coverage you want for each part.
2. Compare the coverage offered by each provider. Look at the coverage limits, deductibles, and other features of each plan.
3. Calculate the cost of the plan. Consider the cost of each plan in relation to the coverage it provides.
4. Review customer reviews. Read customer reviews and ratings to get a sense of each provider’s customer service and claims process.
5. Create a list of pros and cons. Make a list of the pros and cons of each plan and compare them side-by-side.

4. Make sure the plan covers the repairs you need.

A vehicle service contract should generally cover mechanical repairs that occur post-warranty, such as parts like brakes and clutches, electrical components, fluid and lubrication services, diagnostic tests and repairs, engine components, and transmission repairs. However, it is important to keep in mind that many everyday issues such as upholstery damage, tire damage or regular wear and tear may not be covered, and some policies may also deny coverage if a noncovered part damages a covered part. Additionally, some providers may require you to pay for vehicle diagnostics and/or a deductible. Be sure to read through the fine print of any service contract you consider to understand exactly what is and isn’t covered.

5. Read the contract carefully to understand what is and isn’t covered.

When reading a vehicle service contract, one should consider the following points:

1. Thoroughly read through the fine print of a sample contract and investigate the company to see how customers rate it on the Better Business Bureau (BBB) site and Trustpilot.
2. Ask about exclusions, as a VSC won’t cover 100 percent of every single breakdown.
3. Compare the terms of the contract to all warranties that cover your car, as sometimes the coverage in a service contract is duplicated by a warranty you already have.
4. Know what parts are covered and what aren’t, as some everyday issues such as upholstery damage, tire damage or regular wear and tear are excluded from most vehicle service contracts.
5. Understand any depreciation factor that may be taken into account and whether a noncovered part damages a covered part.
6. Be aware of any routine maintenance requirements and make sure to follow the manufacturer’s recommendations for routine maintenance, such as oil and fluid changes.
7. Check for information about common problems for your car’s make and model, as some service contracts may not cover certain types of repairs.

6. Check for customer reviews of the service contract provider

Step-by-step instructions for using customer reviews to evaluate a service contract provider:

1. Check the provider’s profile on the Better Business Bureau (BBB) website.
2. Search online for customer reviews of the provider on sites such as Google and Trustpilot.
3. Read customer reviews carefully and note any complaints about the terms of the service contract, the quality of the coverage, or the customer service.
4. Take the time to research the provider and read customer reviews to make sure they are trustworthy.
5. Pay attention to any high-pressure sales tactics or discounts that are specific to first-time callers.
6. Do not respond to mailers that appear to be from your dealership or manufacturer that require you to purchase an extended warranty.
7. Consider purchasing a manufacturer’s warranty as they are typically reliable.
8. Lastly, always read the service contract before providing payment information.

7. Check with the Better Business Bureau to make sure the company is reputable.

Step 1: Read through the fine print of the sample contract before making a purchase.

Step 2: Check reviews on the Better Business Bureau (BBB) site and Trustpilot. Ask about exclusions because a VSC typically won’t cover 100 percent of every breakdown.

Step 3: Find out who is responsible for guaranteeing service under the contract. It may be the manufacturer, the dealer, or an independent company.

Step 4: Learn as much as you can about the reputation of the company by contacting your local state consumer protection office, the state motor vehicle department, the local Better Business Bureau, or your local automobile dealer association.

Step 5: Check if the contract is underwritten by an insurance company. This is required in some states.

Step 6: Familiarize yourself with the basic dos and don’ts of purchasing an extended warranty or vehicle service contract.

Step 7: Don’t respond to mailers that appear to be from your dealership or manufacturer.

Step 8: Avoid companies that pressure you into purchasing coverage immediately.

Step 9: Read the contract carefully before providing payment information.

Step 10: Research the company on websites like Consumer Reports, the Better Business Bureau (BBB), Google, and Trustpilot.

Step 11: Consider manufacturer warranties as an alternative.

8. Make sure the contract is not a scam

Step 1: Don’t respond to mailers. A common tactic of fraudulent companies is to send out mailers designed to look as though they are from your dealership or manufacturer. No manufacturer will require you to purchase an extended warranty.

Step 2: Take your time. Some scam warranty providers pressure customers into purchasing coverage immediately. Companies may offer first-time caller discounts or tell you that you can only lock in a low price by purchasing immediately. High-pressure sales tactics are a red flag, and good companies don’t need to resort to them.

Step 3: Read contracts. Always read your contract before providing payment information. Look for exclusions and make sure you understand the terms of the contract.

Step 4: Do research. Learn about a company by searching online. Good companies have established profiles on websites like the Better Business Bureau (BBB) and large numbers of customer reviews on sites like Google and Trustpilot.

Step 5: Trust your judgement. Verify information yourself and don’t assume just because a vehicle service contract is sold through your dealership that it is a quality product.

Step 6: Consider manufacturer warranties. While manufacturer warranties are not always the best or cheapest option, they are typically reliable. For the most part, you can trust that a manufacturer warranty is legitimate.

Step 7: Be aware of add-ons. Make sure you understand what you’re buying and read the fine print before signing a contract.

Step 8: Report a problem. If you suspect you’re a victim of an auto service contract or extended warranty scam, contact the dealer, service contract company, state attorney general, or Federal Trade Commission for help.

9. Invest in a plan that suits your budget

Investing in a plan that suits your budget for vehicle service contracts can be done in a few simple steps. First, research the company you plan on purchasing the vehicle service contract from. Check online reviews and ratings, and look at the coverage plans they offer. Make sure they offer the components you need, like brake pads, the drive axle, the air conditioning system or even hoses and gaskets. Second, ask for discounts and look for sales. Some companies offer money-back guarantees, so make sure to use this to your advantage. Third, compare multiple quotes and determine which one covers your needs the best. You may want a long-term or high-mileage plan, depending on your driving habits. Finally, once you’ve found the plan that works for you, make the purchase and enjoy the peace of mind that comes with knowing you have the protection your car needs.

10. Make sure the company provides 24-hour customer service

It is very important for vehicle service companies to provide 24-hour customer service. When you purchase an extended warranty or vehicle service contract, you have a right to expect that your coverage will be honored if something goes wrong with your vehicle. Having access to customer service 24 hours a day can help ensure that you get the coverage you are entitled to in a timely manner and without any unnecessary delays. Furthermore, being able to talk to a customer service representative can help you understand the details of the contract, so you can make an informed decision and avoid any unexpected exclusions. Doing research on the company and the coverage plans can help you make the best decision, but having access to 24-hour customer service can provide you with a more personal experience and give you the confidence that you are getting the coverage you need.