VSC FAQs

If you want to protect your vehicle against unexpected repair costs, a vehicle service contract can be one of your wisest investment choices. However, it’s important to research companies, coverage, and service after the sale before making such an important purchase. The list below answers many of the most frequently asked vehicle service contract questions.

What is a vehicle service contract?

Vehicle service contracts are designed to protect consumers and their pocketbooks against unexpected, costly repairs to their vehicle. Plans cover the costs associated with vehicle repair, including parts, labor, and sales tax, for covered repairs or replacements. Contracts have different coverage levels and benefits, depending on the type of contract purchased and the place of purchase; therefore coverage for any given repair is based on the terms and conditions of the consumer’s particular policy.

What is an extended warranty?

An “extended warranty” is a contract offered by a new car dealer to “wrap” the new car factory warranty and extend beyond it. A vehicle service contract is sometimes incorrectly referred to as an “extended warranty” if sold outside of a new vehicle purchase. The difference is subtle but important: warranties are provided by a manufacturer and are included with the original vehicle purchase. In contrast, vehicle service contracts must be purchased separately and can be purchased at any time; although the earlier you purchase a service contract in the life of the vehicle, the better coverage you can usually obtain.

What’s the difference between a vehicle service contract and a manufacturer’s warranty?

Warranties come with a product and are included in the purchase price. Service contracts, on the other hand, are agreements that are separate from the contract or sale of the product. They are separate either because they are made some time after the sale of the product, or because they cost the customer a fee beyond the purchase price of the product.

Are auto manufacturers involved with the creation and sale of vehicle service contracts?

No. Vehicle service contracts are normally not affiliated with the auto manufacturers in any way. They are typically administered by a third party and are backed by an insurance company.

What is the value of a vehicle service contract?

  • The vehicle is still the second largest investment in most households. More than 1/3 of all vehicles experience one or more failures in a given year. A vehicle service contract can help you avoid surprises and costly auto repairs while protecting your investment.
  • You are more likely to use your vehicle service contract than other forms of protection. In fact, the average vehicle service contract holder will make 4-5 claims over the life of their contract.
  • Hourly labor rates currently average over $80 nationwide. With the complexity of today’s computer-laden vehicles combined with today’s labor rates, one repair can often cost more than the vehicle service contract itself.
  • The risk of component failure and associated repair costs increases with your vehicle’s age and mileage. Often owners put off needed repairs until they can afford the cost of the repair – often resulting in additional damage to the vehicle, additional repair costs, and unsafe driving conditions.
  • A vehicle service contract can increase the resale value of your vehicle.
  • See VSC Purchase Benefits for more information.

What should I look for when purchasing a vehicle service contract?

Review the contract and/or be sure its terms and conditions are clearly explained before providing payment information. Before purchasing service contract coverage, consumers can also review the selling company and/or administrator’s company profiles with the Better Business Bureau (BBB). See VSC Review Guide for more information.

How does a vehicle service contract work?

The contract holder is covered when their vehicle experiences a breakdown or failure that is covered by the terms and conditions of the policy purchased. Typically, you simply have the repair facility of your choice contact the claims administrator indicated in your policy to report the claim prior to repairs. The claims representative then works with the repair facility to ensure your vehicle is repaired properly and payment for repairs is typically paid directly to the shop, less any applicable deductible. Much like a manufacturer’s warranty, the vehicle components that are specified for coverage in your agreement should be covered entirely, provided regular maintenance has been properly and regularly performed as defined by the terms and conditions of your contract.

What does a vehicle service contract cover?

Unlike vehicle insurance designed to cover you and your vehicle in case of an accident, vehicle service contracts cover necessary automotive repairs when covered breakdowns or failures occur. Each vehicle service contract is different. It’s important that potential buyers review any contract carefully and ask any questions they may have before purchase.

Can my claim amounts exceed the amount of money I paid for my vehicle service contract?

Yes, this is typically the case. However, you should read your policy carefully to fully understand what is covered and whether there are any coverage caps that you need to be aware of.

How are vehicle service contract claims paid?

Claim payment varies from agreement to agreement. In many cases, payments are made directly to the repair facility by the administrator. In other cases, a contract holder may be reimbursed for repairs made. Often, the policy owner is required to contribute via a deductible payment; although some companies also offer a zero deductible option.

How does a vehicle service contract deductible work?

Most vehicle service contracts come with a deductible. Typically, the deductible only needs to be paid one time for each repair visit, no matter how many different items are repaired or replaced.

Is it true that as long as I have vehicle service contract or vehicle protection coverage, I don’t need to worry about my vehicle?

No. Vehicles still need proper maintenance, as outlined in your vehicle’s owner’s manual. Be sure to keep accurate maintenance records and receipts. Neglecting this responsibility may not only jeopardize your service contract coverage, but will also put your investment at risk.

What vehicle upkeep am I responsible for in order for my service contract to remain valid?

While it varies from contract to contract, most vehicle service contracts explicitly state which items the contract holder is responsible for maintaining regularly. This often includes regular manufacturer recommended maintenance such as oil changes and fluid checks.

Do I have to pay for my vehicle service contract in full at the time of purchase?

No. Most vehicle service contract sellers offer options to pay for your contract over a period of time with no additional fee. Ask the service representative what types of payments plans are offered.

What happens if I sell my vehicle? Is my vehicle service contract transferable?

Many vehicle service contracts are transferable, depending on the type of policy and place of purchase. A transferable vehicle service contract can add value to your vehicle when potential buyers consider it for purchase. Passing along peace of mind can make the sale more attractive to many.

What if I want to cancel my vehicle service contract?

The specifics of cancelling a vehicle service contract vary from provider to provider. Cancelling within 30 days of purchase will often provide for a full refund. After that period, and if the contract was not utilized, a pro-rata refund may be available depending on what is specified in the agreement. In some cases, an administrative fee may reduce the amount of your refund. Ask before purchasing your service contract what the terms of your agreement allow, including whether there are any administrative fees associated with canceling.

Will purchasing a vehicle service contract subject me to telemarketers and mailings from companies that may not be reputable?

Purchasing a vehicle service contract from a reputable provider will not subject you to additional mailings and telemarketing from unsolicited sources. Check your provider’s privacy policy to be sure, but most companies do not share your information with any other sources.

Why shouldn’t I wait to obtain coverage or broaden my existing coverage?

  • Health and life insurance costs rise as we age; similarly the cost for vehicle protection coverage will rise as the vehicle ages and accrues mileage. In fact, labor rates have risen by an average of $20 per hour in the past 3 years. A vehicle service contract helps to offset rising repair costs at an affordable price by protecting your vehicle against tomorrow’s repair bills at today’s prices.
  • You will be offered the longest terms and the lowest rates for newer vehicles with lower mileage.
  • Statistics show in the current economy, consumers plan to keep their vehicles longer as opposed to trading in or purchasing new. Vehicles are lasting an increasingly long time – 79% of 10-year-old vehicles are still on the road, with the typical passenger car surpassing 150,000 miles, and the typical SUV surpassing 180,000 miles. Vehicle service contract coverage is meant to fill the gap or take over when your existing factory warranty expires.