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Buying Guide for Service Contracts

Extended Auto Warranty Buying Guide

When you buy a vehicle the manufacturer provides a standard auto coverage in case you need any repairs or maintenance on the vehicle. The warranty typically lasts for a certain amount of miles or years and usually covers any part that is defective due to defective materials or poor workmanship. However, if you typically keep your vehicle a long time or drive more than 12,000 miles per year, you’ll probably benefit from having extra coverage.


An extended auto warranty, also known as a vehicle service contract,  is a contract to cover vehicle repairs and services after the original warranty has expired. The term “extended auto warranty” is a little confusing. It makes the warranty sound like you have to go through your original vehicle’s manufacturer to extend the first warranty. That isn’t true. You can buy an extended car warranty from:

  • Manufacturer
  • Dealer
  • Directly from one of the providers

Another misnomer about the term “extended auto warranty” is the “warranty” part. It’s not actually a warranty. Like a protection plan from the manufacturer, an extended policy covers things like regular maintenance and repairs for a fixed amount of time. Thus, this type of warranty is actually a service contract.

Extended Service Contracts aren’t Just for New Vehicles

You can purchase an extended warranty for a new or used vehicle. Of course, a new vehicle comes with a factory warranty such as 36,000 miles or three years but the dealer will give you a chance to extend the original warranty for extra cost. It is your decision to purchase it or not. Any extended protection plan doesn’t have to be purchased at the time of vehicle purchase, you can buy the policy at any time before the factory coverage expires. With third-party warranties, however, you can purchase protection even after the factory one expires. Remember, that if you purchase a used vehicle with the original factory warranty, it typically won’t transfer over with the title change and extended protection policy will. So it is a good idea to invest in a service contract, you just have to make sure that you find a good one from a reliable provider.

Vehicle Service Contract Tips

If you are going to purchase an extended protection policy, take the time to shop around. You need to find the best coverage at the best price.” You’ll probably become overwhelmed with all the warranty options you’ll find online. Thankfully, there are some independent companies that review and rate coverage providers. However, you’ll still have to conduct research to find the best one for you, here are some tips:

1

Look at the reliability of your vehicle. You want to see if the model has a history of repairs or maintenance that you’ll need in an extended warranty.

2

The deductible. Closely look at the deductible amount before selecting the warranty. You not only want to know how much money you’ll pay in a deductible, but your out-of-pocket payment per repair or visit.

  • Per repair deductible refers to each vehicle part serviced.
  • Per visit refers to your payment regardless of what vehicle part is being serviced.

For example, your repair deductible is $100. Your mechanic must service your alternator and fuel pump. You’ll pay $200. However, if you opt for a deductible that is per visit and your deductible is $100, you pay that amount only.

3

Type of repairs and maintenance covered. Does the warranty cover breakdown and wear and tear? Breakdown means that parts that break. However, wear and tear refers to parts that need replacement because their worn. Different extended warranties cover different repairs, but most plans do cover:

  • Seals and gaskets
  • Engine
  • Drive axle assembly
  • Transmission
  • Supercharger/ turbocharger

Make sure that the warranty covers the type of repairs and maintenance you need.

4

Do you have to pay money for repairs to receive reimbursement? Some extended warranties require you to pay the repair bill then wait for a reimbursement check in the mail. Unfortunately, months can lapse before you get your money back. There are plenty of warranty providers that directly pay the repair shop without any out-of-pocket expense on your part. So you want to quickly take any extended auto warranties off your list that doesn’t pay the repair shop directly.

5

Can the repairs be made at any repair shop? Some extended warranty providers stipulate what repair shop performs the repairs. This takes the choice out of your hands.

Here are some other quick tips:

  • Dealership extended warranties are more expensive than third-party providers.
  • Always obtain multiple quotes.
  • Purchase coverage that takes effect when you buy it.
  • Make sure that you have transferable extended protection, it will be increase the value of your car when you decide to sell it.
  • Investigate the provider before signing up.

Keep in mind that no extended coverage will cover things like:

  • Windshield wipers
  • Brake rotors
  • Shock absorbers
  • Batteries (excluding hybrid vehicles)
  • Exhaust systems
  • Tires
  • Paint
  • Upholstery
  • Sealed beams
  • Glass
  • Moldings
  • Trim
  • Brake pads

An protection plan is a great option to protect against breakdowns. It is available for new and used vehicles. Regardless of where you purchase your warranty, make sure it covers everything you want at a price you can afford.

We hope that you found this Buying Guide helpful. If you have any feedback or questions that were not answered here, please contact us. We will be happy to answer all your questions!


Vehicle Service Contracts are often referred to as extended auto warranties, but they are not warranties. Vehicle Service Contract protects your car after original factory warranty expires. All covered components are listed in the contract and exclude regular wear and tear items.

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