When purchasing a vehicle, whether new or pre-owned, the agent may attempt to sell you an auto service contract to help secure you against the financial burden of unforeseen or costly fixes. It is a contract to perform or bear the cost of certain repairs or services and works just like an extended warranty. That said, it could copy the inclusion you have through your manufacturer’s warranty or an insurance policy, so understand the differences and know what is covered before signing on the dotted line.

Why do you need auto warranties?
Auto warranties are essential if you want to keep your car on the road. People familiar with home warranties can think of auto warranties working on the same lines. To start off, let’s understand the difference between an auto warranty and a vehicle service contract.
Auto repairs can become overly expensive, but a car warranty helps secure customers against any potential repair costs. There are multiple options available in the market, but the real challenge is to figure out which one best suits one’s needs and budget. Car owners often find themselves juggling between the concept of car service contracts and auto warranties. Here’s what can help make a better decision:

How are auto warranties different from service contracts?
An auto warranty is purchased directly from the vehicle manufacturer and typically covers the repair and maintenance costs for 3-5 years. The plan covers a limited amount of mileage, and auto warranties are purchased along with the vehicle. There are no hidden costs, but auto warranties cover only specific components, so you should read the offer document carefully to understand what you’ll have to take care of yourself.

A vehicle service contract is offered by an outside party, like a dealership or third-party provider. These contracts are available for car owners when auto warranties run out, and a vehicle service contract may cover all basic components, or it may be an all-inclusive contract. The contract can last for as little as 6 months to several years. Vehicle service contracts usually offer longer coverage than an extended car warranty, and they also provide various mileage plans.

How much can auto warranties cost?
The cost of auto warranties depends on the type of vehicle and its make and condition, the coverage offered, what is excluded from the plan, and the duration of the agreement. Primarily, this contract offers financial protection to vehicle owners in the event of mechanical faults, and different plans are available to suit the needs and budget of every vehicle owner . There are also comprehensive and exclusive plans that one can opt for if they own a luxury vehicle, like a Mercedes or Jaguar.

The upfront cost for a typical auto warranty plan can range from $1,000 to $3,000 or beyond. Vehicle owners also have to pay a deductible every time the vehicle is serviced or repaired, and this can amount to $50 or $100. The deductible varies based on whether the car is new or certified pre-owned, but the lower the deductible, the higher the premium that owners need to pay. Many car warranty providers also offer free quotes for a better understanding of the plan. The costs go further up for bumper-to-bumper coverage, which covers all of the vehicle’s systems, excluding only wear and tear or cosmetic repairs.

The decision to buy vehicle coverage is a personal choice, but it gives peace of mind. After all, you don’t have to worry about the cost of mechanical breakdowns. You can get quotes from multiple service providers to know which plan best suits your needs and budget before making a decision.