How a Vehicle Service Contract Works in 2025
Between rising repair costs and advanced tech, the price to fix a car in 2025 adds up fast. However, managing the expenses is possible. After a new car’s auto warranty expires, drivers can purchase a vehicle service contract (VSC) for additional protection. This separate plan helps cover future car repairs and eases the financial burden of mechanical breakdowns.
What can you expect with a VSC investment? Keep reading to learn more.
What Is a Vehicle Service Contract?
A VSC is an optional product that you can buy for your car at any time, including once the manufacturer’s warranty has expired. The industry often markets VSCs as “extended car warranties,” but federal law does not define them as such. Why? VSCs do not carry the same legal protections. Instead, they are add-on contracts between you and the provider that can help cover unexpected repairs and pricey parts as your vehicle ages. Still, the industry uses these terms interchangeably.
What Does a VSC Cover?
The level of coverage you get in a VSC can vary significantly between providers. Some auto protection plans are exclusionary and deliver near bumper-to-bumper protection. Others, such as a powertrain warranty, are less comprehensive but protect major car components, including the engine, transmission, drivetrain, and electronics. Optional add-on extended warranty options include air conditioning, suspension, or high-tech features.
Who Offers Vehicle Service Contracts?
Independent third parties, dealerships, and automakers sell VSCs. However, the coverage plans, terms, pricing, and deductibles all vary.
Third-Party Providers
Third-party providers offer customizable VSCs with fewer limitations and broader coverage. Whether you’re looking for protection against major part repairs or help with routine maintenance, third-party VSCs may be a valuable solution after your manufacturer warranty ends. The service contracts are flexible, allowing you to choose the length of your term and any reputable ASE-certified mechanic. And instead of trying to come up with a lump sum of money to buy the contract, the providers will work with you to secure a monthly payment plan you can afford. You can also worry less about breaking down when you’re away from home. Third-party contracts often include desirable benefits, such as 24/7 roadside assistance, rental car services, and complimentary towing.
Dealerships
VSCs from your dealership can provide peace of mind, knowing the technicians are trained on your car’s specific make and model. But the prices can be high, especially for older used vehicles, and include shorter terms and more limitations and exclusions. For example, a dealer will likely give you the option to pay for the VSC upfront or roll it into your car’s payment plan, which can ultimately result in higher interest costs and a bigger bill to pay. Most dealers also limit you to using their network’s authorized service centers for repair work.
Automakers
An automaker’s post-warranty plan can extend factory coverage for mechanical breakdowns. The terms are typically shorter, less flexible, and limit what’s covered.
How Are Claims Filed?
To file a claim, you’ll typically visit an approved repair shop, provide your contract info, and wait for the provider to authorize repairs. Most claims require pre-approval and a deductible. After the covered repairs are taken care of, the provider pays the repair facility directly or reimburses you.
People also ask
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Is a vehicle service contract the same as an extended warranty?
Sellers often market VSCs and extended warranties as the same product. However, they are technically different. A VSC is not an actual auto warranty under federal law. It is a separate service agreement that you can purchase for your car at any time, taking effect after the factory warranty expires. An auto warranty or manufacturer’s warranty, on the other hand, is automatically included with a new vehicle, and the cost is factored into the car’s sale price.
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Can I purchase a service contract after my car warranty has expired?
Yes, you can buy a VSC through a third-party provider at any time during ownership.
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What’s not usually covered in a VSC?
Standard vehicle repair exclusions include routine maintenance, such as oil changes, wear-and-tear items like wiper blades and brake pads, pre-existing mechanical issues, and damage resulting from collisions. However, some companies offer customizable plans with routine maintenance add-ons.
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Are service contracts worth it for used cars?
Yes, especially if you have an older or high-mileage vehicle. VSCs help offset costly repairs and may include added benefits like roadside assistance or trip interruption coverage.
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Can I cancel a VSC if I change my mind?
Your contract’s terms will state the provider’s cancellation policy. Carefully review your agreement for the details and steps you have to take to navigate the process. Some providers offer a 30- or 60-day grace period and a full refund as long as you haven’t filed any claims. You may be subject to administrative or processing fees and/or pro-rated refunds if you cancel beyond this window.
Save on Repairs With Warranty Coverage
Protecting your budget from out-of-pocket repair costs doesn’t have to end once your car’s manufacturer warranty expires. You can purchase an extended warranty or vehicle service contract, a separate agreement, to help reduce future auto repair bills. Carefully review the fine print to ensure the terms meet your expectations before you select a coverage plan. Explore customer feedback, compare coverage plans, and get multiple quotes. Remember, you deserve a plan and a provider you can rely on, and finding one is possible.
