
When you get car insurance, you’re doing so with the hope that you’ll never need it. In the event of a car accident, knowing that you are covered by insurance is a great feeling. Almost all of the coverage options you’ll see when looking for car insurance are designed to guard against damage to your vehicle due to an accident or theft.
But what happens in the event of a mechanical breakdown? When your vehicle breaks down, automobile insurance companies will not cover mechanical repairs. A vehicle service contract (VSC) will cover your vehicle in the event of a mechanical breakdown or failure. Depending on your level of coverage, these plans can cover large repairs, like an engine or transmission, all the way down to minor things, like a power window motor.
Many new cars—and some used or certified pre-owned ones—come with a limited warranty, which is covered in the purchase price of the vehicle. A limited warranty usually lasts for a certain amount of time or a certain number of miles and covers defects or repairs and sometimes even routine maintenance. But what happens when the warranty expires? Typically, the owner would be 100 percent liable for any repairs needed from that point on. This is where a vehicle service contract (VSC) comes in.
Sometimes referred to as an extended warranty plan (though not officially a warranty by legal definition), a vehicle service contract is a paid plan that helps cover the costs of any repairs needed once the limited warranty has expired. As the vehicle ages, the likelihood of it needing repairs rises. The biggest benefit of obtaining a vehicle service contract is the potential savings on unforeseen repairs for a vehicle that is no longer covered by a factory warranty.
Depending on your level of coverage, most VSC plans cover:
Additionally, the following items may be covered by VSC policies:
Considering a VSC is an important decision. Some of the benefits are:
Vehicle service contracts are worth it for many drivers. They enhance vehicle longevity by ensuring you can afford repairs later in your car’s life. In fact, a recent study reported that “62 percent of consumers with active warranties report benefitting from them within the past year.” However, the value of a vehicle service contract will ultimately depend on the driver and vehicle. Vehicle service contracts can save money on costly repairs but may not be the best financial investment for everyone.
If you plan on selling your vehicle shortly after your factory warranty expires, you probably don’t need a vehicle service contract. However, if you’re one of the many drivers who intend to keep their vehicles around for the long haul, a vehicle service contract can help protect your budget and keep your vehicle running in peak condition.