You’ll often hear the term “extended car warranty” or “car warranty” used interchangeably with “vehicle service contract.” Despite the fact they both protect you from expensive mechanical breakdowns, warranties and vehicle service contracts are actually two different things.
Find out what makes warranties and vehicle service contracts different, as well as the benefits you can get from a third-party service contract provider like CARCHEX, which offers five levels of coverage for any vehicle.
Warranties vs. Vehicle Service Contracts: Know the Difference
First, let’s define both warranties and vehicle service contracts. According to the Department of Justice, a warranty is a statement from the seller or manufacturer that:
- The car is free from defects in materials or workmanship
- In the event such a defect should become evident within a defined period of time, the manufacturer will repair the defective part for free
In other words, you can consider a factory warranty to be a true warranty. It promises a car that is free from defects in materials, and it is included in the price of the new vehicle.
Then what is a vehicle service contract?
A vehicle service contract, also called an “extended warranty,” is an optional protection plan you can purchase at an extra cost to cover the repairs on specified vehicle parts. This contract is usually only valid when the factory warranty expires. The repairs are not entirely free, since you must pay for the contract itself and a small deductible at the time of repairs. Parts and labor costs are normally covered.
Differences Between Warranties and Vehicle Service Contracts
Dealership Extended Warranties
But wait. Don’t dealerships also offer extended warranties, or vehicle service contracts, once the factory warranty expires? What’s the difference between a dealership extended warranty and a third-party extended warranty?
1. Dealership extended warranties, like factory warranties, normally require you to visit the dealership for repairs, rather than a repair facility of your choice. Third-party providers give you the flexibility to choose within a larger network of available mechanics. CARCHEX partners with a network of over 30,000 repair facilities, from major chains to local mechanics.
2. Dealership extended warranties also come at an extra price, but this price is set by the dealership, and it can’t be negotiated against competing contracts. At CARCHEX, we use our buying power to shop around and get the most competitive and affordable price for its customers.
3. Third-party providers use independent administrators that are responsible for the payment of each repair (and are usually backed by an insurance company to ensure cash reserves for payments). The provider itself is the marketer for those administrators, whereas the dealership itself is the obliger or party responsible for repair payment. CARCHEX uses trusted administrators and markets reliable, insurance-backed its plans.
How to Choose a Vehicle Service Contract
When shopping for a vehicle service contract, you don’t have to choose the first offer you come across. Are there too many exclusions? Are some parts excluded unless they were damaged by another covered part? Read the fine print and ask questions.
Here’s what we recommend looking for an extended warranty:
- Cancellation Policy—Your state may have a law that requires all vehicle service contracts to be cancellable within a certain number of days, usually 60 days for new cars and 30 days for used cars with a full or partial refund. CARCHEX plans are cancellable and offer a 30-day, money-back guarantee.
- Deductibles—Look for plans with low deductible, closer to $50 or $100. Some deductibles can be well over $200. CARCHEX offers deductibles as low as $0.
- Direct Payment—Don’t get caught purchasing a vehicle service contract that makes you pay for repairs up front. Unreliable companies may take too long to reimburse you (if they do at all). CARCHEX makes sure that the repair facility is paid directly, so you only have to worry about the deductible.
- New or Used Vehicles—Does the plan cover pre-owned vehicles or only new vehicles? Depending on coverage level, a contract may cover one or the other, or both.
- Transferability—Look for contracts that allow you to transfer protection to a new owner, usually for a small fee.
- Pressure to Buy—If a sales representative pressures you to purchase a vehicle service contract on the spot, it’s usually a warning sign. CARCHEX will provide you with coverage options without the pressure to buy right then.
- Read the Details—A trustworthy VSC provider will let you read the contract and go through the fine print before you make a purchase. CARCHEX makes sample contracts readily available on our website.
How Much Do Vehicle Service Contracts Cost?
The average vehicle service contract can cost $1,000 to $1,500 if purchased from the dealer or manufacturer. However, with third-party extended warranty, you’ll find more affordable market prices based on a wide variety of coverage packages.
In addition, CARCHEX offers easy, monthly payment plans that spread out the cost of the contract, so you don’t have to pay hundreds of dollars upfront. With low deductibles and a No-Haggle, Low-Price, Everyday Guarantee™, you’re getting a fair price for coverage.
Is A Vehicle Service Contract Worth the Extra Cost?
When it comes down to it, you want an extended warranty that costs less than the potential repairs. Imagine you drive a 2015 Chevy Impala. A catalytic converter replacement (with labor) can cost upwards of $1,300, a full transmission replacement can cost $1,800 to $3,400.
If your service contract costs several thousand dollars, and your deductible is $250, then it may be smart to simply save your money. If your powertrain warranty is only $700 with a $50 deductible, then you already saved hundreds of dollars on an unexpected, mechanical breakdown. CARCHEX gives you the opportunity to save money overall.
Reputable Coverage with CARCHEX
CARCHEX was founded in 1999 and has been accredited with the Better Business Bureau since 2009. The BBB has since given CARCHEX an A+ rating.
As you can see in the chart below, CARCHEX has fewer complaints than competitors, such as Endurance or AutoAssure, as well as higher satisfaction ratings.
Customers want prompt and straightforward service. That’s why CARCHEX has a 99.9% Customer Satisfaction Rate, as well as awards and industry accolades, including:
- “Best of 2017” Golden Bridge Award
- 8-time Inc. Magazine 500|5000 Hall of Fame Honoree
- 2017 “Top Pick” on ThoroughlyReviewed.com
- A 5-star rating for 6 consecutive years on TopConsumerReviews.com
- Endorsements from SiriusXM, CARFAX, Kelley Blue Book, and more
Easy Claims Process
Getting repairs on your car is easy. Simply take your car to the repair facility and contact the Claims Department to receive approval. If approved, your payment will be taken care of (with the exception of the deductible), and you can pick up your vehicle once it is fixed.
Compare CARCHEX Vehicle Service Contracts