Vehicle Service Contract Guide: Choosing the Best Coverage

Disclosure: This content was produced by an independent editorial party for the purposes of educating our customers, and is not influenced by the other business operations of CARCHEX.

An extended car warranty is protection from the vehicle manufacturer against mechanical breakdowns. This term is sometimes incorrectly used to describe coverage from third-party providers, which offer similar protection plans called vehicle service contracts. CARCHEX is a vehicle service contract provider.

A vehicle service contract (VSC)—whether for a new or used car—can save you money on a car’s expensive repair costs. This is especially beneficial because as vehicles age, the likelihood of needing repairs increases. Additionally, once a manufacturer’s warranty on a car expires, the average repair costs can skyrocket. Depending on your provider, different coverage plans allow you to customize your VSC to meet your needs.

Many drivers may not realize the potential savings offered by a VSC, but they can help you:

• Spread car repair costs out over time—Rather than pay a large repair bill all at once, a vehicle service contract allows you to pay for those repairs in smaller amounts over time.
• Maintain high-mileage vehicles—If you tend to keep cars for many years, you can benefit from a vehicle service contract. Older cars with high mileage are prone to breakdowns and often require expensive repairs. Adding a VSC helps you afford repairs when you need them and keep the car on the road.
• Realize a return on investment—Owners who are interested in selling their car may see a return on the purchase of a VSC. Many vehicle service contracts from companies like CARCHEX can be transferred to a new owner. This can make the car more marketable, as it shows that you care about maintenance and repairs.

Almost every new car will come with a factory warranty from the manufacturer. Many times, this manufacturer’s warranty has fine print and limitations. While a new car is less likely to need repairs, it can still be worthwhile for a new car owner to purchase a vehicle protection plan once the manufacturer warranty expires. Vehicle protection companies base the cost of a VSC on the vehicle’s age, mileage, make, and model. A plan for a new car with fewer miles can cost less than one for an older vehicle with more mileage.

Vehicle Service Contracts for Used Cars

Buying a used car comes with risks, such as prior care and repairs made to the vehicle, and often doesn’t include a manufacturer’s warranty. There may be underlying issues that will cause the car to break down within a few years of buying it. To combat the costs of their repairs, used car owners can purchase a vehicle protection plan. If the used car breaks down, you may save hundreds of dollars in repairs.

If you are considering purchasing a used car, consider the following to determine whether an extended vehicle protection plan is right for you:

• Known issues with your car—Some older cars suffer from issues like leaks or certain parts going out over time. These issues can be consistent in certain makes and models. Do some research and see what kind of repairs to expect in your used vehicle and whether you can fit them into your budget without the assistance of a VSC. Also, make sure to get the car’s history from its previous owner.

• Determine the reliability of your vehicle—Is your vehicle’s make and model known for its lifespan? Understanding how reliable the used car is will help you determine how much coverage you need in a vehicle protection plan.
• How long you plan on driving the car—Whether you’re planning to keep or sell the car in a few years, a vehicle protection plan has its advantages. If you keep it, you can reap the financial benefits when it comes time to sell the car. Since you can transfer it to the new owner, it will increase its value.

Vehicle protection plans can cost anywhere from a few hundred dollars to a few thousand dollars. Vehicle protection providers calculate the cost of a plan using specific data about each vehicle. Factors such as the make, model, mileage, and age of the vehicle help determine how much an extended vehicle protection plan will cost. That’s why it’s less expensive to add a VSC to a car when it’s younger and has fewer miles.

The level of coverage will also affect the cost of an extended vehicle protection plan. The more coverage you opt for, the more the plan will cost. Vehicle protection plan providers like CARCHEX take all of your vehicle’s information into account to give you the estimated price of different coverage options.

Some car dealerships or extended vehicle protection companies require you to haggle to get the best price. A third-party company that hides the best price from you in the beginning may create headaches down the road when filing a claim. It is best to find an honest VSC provider that doesn’t waste your time with useless haggling. CARCHEX promises a No-Haggle, Low-Price Everyday Guarantee™ for our customers.

Due to the many different factors that go into determining the price of an extended service contract, it is best to contact your provider and get a quote.

There are several coverage options offered by car dealerships, manufacturers, and third-party companies. Each type provides different levels of coverage and may vary across providers.

Many car dealerships offer extended car warranties for both new and used cars. By comparing your options, you’re better positioned to make an informed decision.

Dealership Extended Warranties

Extended warranties from car dealerships are known for being restrictive. Short-term lengths and mileage limits prevent car owners from getting the most out of their protection plan.

Buying an extended warranty from a car dealership can also place major limitations on where you can have your car repaired. It is not uncommon for a dealer to require that any repairs made under their extended car warranty be completed by their service center or an approved repair facility. That means you’re limited to their locations. For example, if you purchase a Lexus extended warranty from the dealership, all the repairs are by factory-trained technicians. It’s good to have a mechanic who knows your type of car, but not being able to visit the trusted repair shop down the road can be a real inconvenience if you’re in a fix.

Third-Party Extended Vehicle Service Contracts

Where a dealership is focused on selling as many cars as possible, a third-party company specializes in vehicle service contracts and is focused on offering you protection that makes sense for your vehicle. A CARCHEX Extended Vehicle Protection Plan, for example, allows you the freedom to find the right repair shop for your vehicle out of thousands of options.

A VSC from a third-party company gives you the option of customizing your coverage, while a dealership likely only offers a couple of extended warranty options with limited miles and years. Reputable third-party companies provide several coverage levels. CARCHEX even has several plans within each coverage level.

When looking for the best extended vehicle protection plan, a trusted provider can make all the difference. You will want to find a company with a great Better Business Bureau (BBB) rating and endorsements from other reputable businesses in the industry. They should also offer plans that are backed by reliable insurance companies.

The chart below compares some of the nation’s leading vehicle service contract companies.

While companies like Endurance, Concord Auto Protect, Delta Auto Protect, AutoAssure, and AA Auto Protection provide vehicle service contracts, they are not BBB accredited. Additionally, many of these companies have been in business less than 20 years. Companies like CARCHEX, for example, have been providing vehicle service contracts for around 25 years.

According to S&P Global Mobility, in 2024 car owners in the U.S. are holding on to their vehicles for around 12.6 years, a two month increase from a year before. Based on our research of the costs associated with aged and high-mileage vehicles, a VSC can save you money on those inevitable repair expenses. As you research buying a protection plan, be sure to ask potential providers these important questions. Knowing information about the coverage, cost, and length of contracts can help you make the best decision.

What Coverage Options Are There?

Learning the different coverage levels offered by a potential vehicle protection company is the first step in determining what type of VSC is right for you. Extended vehicle protection companies usually provide several coverage options to ensure everyone can find a plan that meets their specific car’s needs.

For example, an extended protection plan may only need to cover major repairs for a few years before the car is sold or traded. A new car owner probably feels more comfortable with a high-level plan to protect their investment and the majority of components in their vehicle.

If you have an older car that needs protection from just the most expensive repairs, a basic plan may be the best fit. Powertrain coverage includes the engine, transmission, and related parts.

Whether you choose a dealership or third-party protection plan, consider the following:

• Determine how much risk you are willing to take in the repair costs of your car and how long you plan to keep the vehicle.
• Research the reliability of your car to estimate common repair costs for your vehicle.
• Talk with a representative and find out what coverage options they have available. They should be able to tell you what plan is the best fit for you. To speak with a CARCHEX representative, call 866-261-3457.

How Long Do Vehicle Service Contracts Last?

Extended protection plans range in length of contract, lasting from just two years up to 10 years or well over 100,000 miles. Here’s what to consider when determining the length of your coverage:

• The length of time you plan to own the car—Owners who want to keep their car for many years should recognize the risks associated with an older car. As cars age and are more expensive to repair, it can be beneficial to choose a plan with the longest term available. Even if you plan on keeping the car for only a few more years, a VSC lasting five or more years that can be transferred may help raise its value when you to go sell.
• The costs of coverage options—Generally, a longer extended vehicle protection plan will be more expensive than a shorter one, depending on how much coverage is offered. To get the best price on a longer, high-level plan, consider buying your VSC as soon as possible. That’s because a younger car’s VSC will be less expensive up front and will still cover the car as it ages.

There are many reasons to purchase an extended vehicle protection plan from CARCHEX:

• Comprehensive, flexible coverage—Select from a variety of coverage levels and several plans within each level.
• Affordability—Ask us about our financing options and easy monthly payments.
• Customer Experience Above All—Serving you is our top priority.
• Excellent customer service—Our representatives are knowledgeable and professional, and we have an A+ BBB customer service rating.
• Trusted partnerships and endorsements—Brands like Edmunds, The Motoring Club, CARFAX, and more all recognize CARCHEX as a reputable provider.
• No-Haggle, Low-Price Everyday Guarantee™—By offering our best price up front, we show the honesty and great customer service that keeps our customers happy.
• Work with your repair shop of choice—No dealership or chain requirements.
• Claims made directly to repair shops—You don’t have to wait to be reimbursed.
• 30-Day Money Back Guarantee—Not satisfied? You can get your money back.
• Extra benefits—Roadside assistance, gas delivery, trip interruption services, car rentals, and other perks are included in every plan.
• A free, customized quote—Call today for a quote that’s tailored to your specific vehicle.

With five levels of coverage, CARCHEX has a VSC for every budget and vehicle. Plans range from Titanium—which provides up to 10 years of high-level protection for your car—to Powertrain, which protects your powertrain and offers up to six years of coverage for major repairs.

An Extended Vehicle Protection Plan from CARCHEX helps protect your car—and your wallet— for years to come. By comparing our great customer service, A+ BBB rating, and endorsements with other companies in the industry, it’s easy to see why CARCHEX is a top choice for extended vehicle protection plans. We offer five levels of coverage to meet the needs of every vehicle owner.

Find the best coverage for your car by calling 866-261-3457 for a free quote.

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Sources:

Consumer Reports: https://www.consumerreports.org/car-maintenance/the-cost-of-car-ownership/

Phys.org: https://phys.org/news/2018-04-car-warranties.html

Car Care Council: http://www.carcare.org/car-care-service-schedules/general-service-schedule/

J.D. Power: https://www.jdpower.com/business/press-releases/2019-us-vehicle-dependability-studyvds

Better Business Bureau: https://www.bbb.org/us/md/hunt-valley/profile/extended-warranty-contract-service-companies/carchex-0011-23015869