A vehicle service contract — often called an extended warranty — helps pay for certain repairs after you buy a vehicle. It can make repair costs more predictable, but contracts vary widely. Here's how they work and what to look for.
Service contract vs. warranty vs. insurance
- A manufacturer warranty comes from the automaker and is included with a new vehicle for a set time or mileage. A used vehicle may still have some factory coverage remaining, depending on its age and mileage.
- A service contract is a separate, optional agreement you can purchase. It covers specific repairs for a set term, according to the contract's terms.
- Auto insurance covers damage from events such as accidents, theft, and weather. It generally doesn't cover mechanical breakdowns or normal wear.
These work alongside each other; one doesn't replace another. You'll need auto insurance whether or not you buy a service contract.
Common coverage categories
Contracts are often offered in levels. Depending on the plan, coverage may include:
- Powertrain: engine, transmission, and drive axle components
- Steering and suspension
- Brake system components, usually excluding pads and rotors, which wear with normal use
- Air conditioning and heating
- Electrical systems, such as the alternator, starter, and power accessories
- Fuel and cooling systems
- Technology such as navigation, sensors, and infotainment, on more comprehensive plans
Some plans also include extras such as roadside assistance, towing, or rental reimbursement. Whether any of these are included depends on the specific contract.
What's usually not covered
- Routine maintenance, such as oil changes, filters, and tire rotations
- Wear items, such as brake pads, wiper blades, and tires
- Damage from accidents, misuse, or skipped maintenance
- Problems that existed before the contract started
- Cosmetic items
Read the contract before you decide
The contract itself — not a brochure or a summary — defines what's covered. Before you buy, look for:
- Term: how many months or miles the coverage lasts, and when it starts
- Deductible: what you pay out of pocket, and whether it applies per visit or per repair
- Covered components: whether the contract lists what is covered, or lists only what isn't
- Repair shops: whether you can use any licensed repair facility or must use specific shops
- Claims process: whether repairs need approval before work begins
- Maintenance requirements: the records you must keep for coverage to stay valid
- Cancellation and transfer: whether you can cancel for a partial refund or transfer the contract if you sell the vehicle. These terms vary by contract.
- Who backs the contract: the company responsible for paying claims
Is a service contract right for you?
It depends on the vehicle, how long you plan to keep it, how much you drive, and how comfortable you are paying for an unexpected repair out of pocket. Some drivers value the predictability; others prefer to set money aside for repairs instead. Both are reasonable choices.
At Auto Select, service contracts are always optional. They're never required to buy a vehicle, and we won't pressure you to add one. If you're interested, we'll help you compare options and answer your questions so you can decide what fits.
This article is general information, not legal or financial advice. Coverage is defined only by the terms of the specific service contract.