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Auto Warranty vs Vehicle Service Contract
Auto warranties and service contracts are very different. A car manufacturer issues an auto
warranty with a new vehicle purchase, while a service contract is a separate plan you can buy
after your factory coverage ends. Yet, people who work in the car industry often refer to them
Interchangeably, leading to contusion for many drivers.
So what's the real difference? Learn more below.
| Feature | Auto Warranty | Vehicle Service Contract |
| Who provides it | Car manufacturer | Third-party company |
| When you get it | With a new car | Anytime before or after factory coverage |
| What it covers | Defects from the factory | Breakdowns from everyday use |
| Length of coverage | Usually 3-5 years | Varies by provider; often up to 20 years or 200,000+ miles |
| Custom options | No | Yes, flexible plans and terms |
| Best for | New vehicles | Used or high-mileage vehicles |
What Is an Auto Warranty?
An auto warranty, also known as a manufacturer’s warranty or factory warranty, is a written agreement that promises to pay for specific malfunctions or vehicle defects. Dealerships include these contracts with the purchase of a new car or a certified used vehicle, and they expire after a stated number of years or miles. Most include bumper-to-bumper and powertrain coverage.
Bumper-to-bumper warranties protect most of a car’s parts between the front and back bumpers and typically last 3 years or 36,000 miles, whichever comes first. A powertrain warranty is less extensive and protects components like the engine, transmission, drive axle, transfer case, and differential. Contracts typically last 5 years or 60,000 miles.
What Is a Vehicle Service Contract?
A VSC is a protection plan that helps pay for costly repairs after the manufacturer’s warranty expires. These are often marketed as auto protection plans or extended car warranties, though they’re technically not warranties under federal law. Coverage varies, so reviewing the contract helps you understand what’s included and what’s not.
People also ask
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What does an auto warranty usually cover?
An auto warranty or manufacturer’s warranty typically covers repair costs for mechanical or electrical breakdowns resulting from factory defects. Specifically, automakers will provide bumper-to-bumper and powertrain coverage, but the mileage and time limits differ for each.
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Are vehicle service contracts the same as extended warranties?
VSCs and extended warranties are often marketed the same way, but they’re technically different. A VSC is a separate agreement you buy after the car purchase and isn’t a true warranty under federal law.
Auto Warranty vs. VSC: Key Differences
🛡️ Who Provides the Coverage?
An auto warranty provider is the vehicle’s manufacturer. For example, if you purchase a new Toyota vehicle, then the auto warranty provider is either Toyota (the manufacturer) or the dealership that sells you the car. A vehicle service contract provider can be a third party, a dealer, an automaker, or an insurance company. If you buy a VSC from a dealership, the administrator or provider responsible for handling claims and processing payments may differ from the company that sold you the contract.
Read more about protection plan providers:
📅 When Does Coverage Begin?
Auto warranty coverage starts when the vehicle is purchased or first put into service. VSC coverage may begin when you sign the contract, after a waiting period (typically 30 days), or once the factory warranty ends.
🔧 What’s Covered?
Factory warranties typically include bumper-to-bumper and powertrain protection and may offer perks like roadside assistance. Vehicle service contracts vary widely. Some offer extensive protection, while others cover only essential parts. Many third-party VSCs also include roadside assistance, rental car reimbursement, and trip interruption. Some plans are transferable, which can boost resale value.
💵 Monthly Cost and Deductible
Auto warranties are built into the cost of a new vehicle. You won’t pay out of pocket for covered repairs during the contract term. Vehicle service contracts are separate purchases. Prices vary based on coverage, vehicle type, deductible, and provider. Some require full payment upfront, while others offer monthly payment plans.
⏱️ When You Might Need Each
New car buyers rely on factory warranties during the first years of ownership. Once that coverage ends, a VSC can provide added protection. VSCs are especially valuable for used or high-mileage vehicles. If you want to keep your vehicle long-term but avoid unexpected car repair bills, a service contract can offer peace of mind.
🔍 What to Look for in a Protection Plan
There are several factors you should consider when searching for the right contract. Carefully review the following details before spending your money on an auto warranty or VSC:
- Coverage Terms: What’s included? What’s the length of the agreement? Is there a deductible? Can you transfer the plan?
- Claims Process: Who processes claims? The seller, provider, or a third party?
- Repair Network: Are you limited to specific mechanics or dealerships?
- Exclusions: Common exclusions include pre-existing issues, maintenance, and collision damage.
- Fine Print: Read the entire contract. Some conditions may void coverage.
Frequently asked questions
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What does an auto warranty usually cover?
An auto warranty or manufacturer’s warranty typically covers repair costs for mechanical or electrical breakdowns resulting from factory defects. Specifically, automakers will provide bumper-to-bumper and powertrain coverage, but the mileage and time limits differ for each.
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Can I buy a service contract for a used car?
Yes, either at the time of purchase or anytime after through a third-party provider.
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Are vehicle service contracts worth it?
They can be. If your vehicle is out of warranty and you want to avoid surprise repair costs, a VSC can provide financial protection and perks like towing and rental coverage.
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How to choose the best auto protection plan?
Your best option ultimately depends on your needs, budget, and details surrounding your vehicle. If you’re buying a new car, then the manufacturer’s auto warranty should cover repair expenses for the first few years of ownership. If you own a used car, you can purchase a vehicle service contract through a third party at any time. Research sellers and pick the plan that best fits your needs and budget.
Choose Coverage That’s Right for You
Research providers, compare quotes, and read customer reviews before signing anything. Auto warranties come with new or certified used cars. Vehicle service contracts are purchased separately and can extend protection once factory coverage ends. If your car is older or sees frequent repairs, a VSC can be a smart way to reduce your out-of-pocket costs.
