Buying a car warranty does not have to be overwhelming, even though there is so much information out there.
By the end of this guide, you will have all the information you could possibly need to make an informed decision on whether a car warranty is right for you.
What Is A Vehicle Service Contract?
A vehicle service contract is a paid plan that helps cover the cost of car repairs that you need after your limited warranty has expired.
A vehicle service contract is also commonly referred to as an extended warranty. However, an extended warranty (vehicle service contract) is not a warranty.
How Is A Vehicle Service Contract Different From A Warranty?
A car warranty and a vehicle service contract both pay for repairs to your car, but there are a few key differences that are worth knowing:
- A vehicle service contract is not considered a warranty by law because it is not included in the purchase price of your vehicle. You purchase a vehicle service contract separately
- Vehicle service contracts are meant to protect your car AFTER your warranty expires.
- A vehicle service contracts can last longer than a warranty.
- You can get a vehicle service contract on a used car, while you can only get a warranty on a new car.
- You can customize the coverage of a vehicle service contract. You cannot with a warranty.
The biggest difference between a vehicle service contract and a warranty is choice. With a vehicle service contract, you get to choose from potentially hundreds of companies and thousands of contract choices.
How Does A Vehicle Service Contract Work?
A vehicle service contract is designed to pay for unexpected mechanical breakdowns.
Each vehicle service company is a bit different in how it handles the claims process, so we are going to describe how our process works. If you end up choosing us, this is what to expect. If you do go with another company, their vehicle service contract may be slightly different!
The way our vehicle service contract works is as follows:
- You become a Protect My Car member.
- When your car breaks down, you call our free 24/7 roadside assistance number which will tow you to a mechanic of your choice.
- You hand the mechanic your membership card so your mechanic can get in touch with us.
- Once the mechanic has diagnosed what is wrong with your car, they call us.
- One of our trained claims adjustors works with the mechanic to confirm what is wrong.
- Your mechanic sends over the estimate to our claims department for processing.
- Our claims department tells your mechanic to begin working once we’ve processed your claim.
- We pay the repair shop directly, or we reimburse you minus any deductible you may have.
- You drive away with a working car!
It’s really as simple as that!
To help illustrate this process, we are going to share a story from one of our customers about how her experience went.
I had the opportunity to have Jamari as my claims adjuster. I was incredibly pleased with customer service and how knowledgeable he was about how my plan worked.
He took the time to explain everything that I was not understanding. I was also extremely impressed with the timely manner in which he approved the claim and authorized repairs for my car
I have been without my vehicle for approximately 6 weeks (no fault of Protect My Car) but he has also secured me a rental vehicle until repairs are finished on my car.
So big thanks to Jamari and if all customer service was as polite as this young man I’m sure it would go a long way especially with this pandemic and all of the other problems that are be faced in the world today. Thank you so very much Jamari and thank you also PROTECT MY CAR for having such an exceptional team.
Now that you have a better understanding of how the vehicle service contract works, we need to ask the big question we always are asked.
The Benefits Of A Vehicle Service Contract
The main benefit a vehicle service contract provides is peace of mind. In a sense, a vehicle service contract works like an insurance for all the parts of your car insurance does not cover.
You pay a small sum each month, and in return the most expensive repairs on your car are covered by your vehicle service contract.
In addition to having your repairs covered, your claims adjustor will handle all the negotiating behind the repair to ensure the right parts get put in. If you are uncomfortable negotiating with the mechanic, this can be a big help.
Depending on the vehicle service contract company you go with, you can expect additional benefits including:
- Free 24/7 roadside assistance, which includes typically includes towing, lockout services, gas if you run out, battery service, and much more.
- Free key fob replacement.
- A free rental car while your car is being repaired.
- Partner discounts for car supplies, minor maintenance, etc.
- Trip interruption coverage that pays for meals and a hotel if you are more than 300 miles away from home.
- Rewards points to spend on your favorite brands, restaurants, and stores.
- Free oil changes and tire rotations
What Does A Vehicle Service Contract Cover?
The graphic above tells you what component groups our vehicle service contracts cover. Different companies may cover different components than ours do. There are different types of vehicle service contracts, which makes it important to review exactly what is covered under your policy.
Is A Vehicle Service Contract Worth It?
A vehicle service contract can be worth it. But, after being in business for over 16 years, we think that is the wrong question.
It is better to ask if it is worth it for you.
Because you are not the same as everyone else.
Here is the truth: most vehicle service companies will try to tell you that they are always worth it. We are not one of them, because a vehicle service contract does not make sense for everyone.
Keep in mind used, aging cars are generally more expensive to maintain. Owners of older cars are twice as likely to spend more than $1,000 a year on maintenance and repairs, according to the NPD group. A small monthly payment for protection can save you from a costly repair or replacement bill.
For example, if you can set aside around $5,000, a vehicle service contract may not be worth it for you.
But on the other hand, if you are on a fixed income and not able to absorb a big repair bill, then it might make sense.
There is no one right answer, so we will give you the facts and let you decide for yourself.
A Vehicle Service Contract Might Not Make Sense For You If:
- You have a decent sized emergency fund. It makes more sense to pay out of pocket if this is the case.
- You have a new car that is currently under warranty.
- The undercarriage of your car is very rusty. Most vehicle service contracts do not cover rust.
- You do not rely on your car or you do not drive it frequently.
- Your car is older than 1998, which may make it too old to get coverage.
- You do your own repairs or have someone close to you who will do them for you.
- You want to learn how to do car repairs yourself. We have guides to help you on our blog!
- You drive an inexpensive car that you do not want repaired when it finally breaks down.
- You drive a reliable car that appears to have no issues.
- Your car is cheap to repair and maintain.
- You plan to make aftermarket modifications to your car, which may void your contract.
- You use your car for commercial purposes. We cover commercial vehicles, but most companies do not.
- You drive a vehicle with a salvage or rebuilt title. Protect My Car offers coverage if you do, but very few other companies do.
- You have over 250,000 miles on your car. We cover up to 300,000, but again we are the only company to do so.
There are several reasons why a vehicle service might not make sense for you, and you need to consider all of them before getting a vehicle service contract.
A Vehicle Service Contract Might Make Sense For You If:
- You just bought a used car that is out of warranty.
- Your car warranty is about to expire.
- You plan to keep your car for a long time.
- You drive more than the US average of about 13,500 miles each year.
- You drive a larger, more expensive vehicle such as an SUV, Minivan, or Truck.
- You own a foreign make, which tends to be more expensive to repair.
- Your car is over 10 years old, which can lead to more expensive systems breaking down.
- Your car has a technology package, which can lead to expensive repairs.
- You have over 85k miles on your car, which is where breakdowns can become more frequent.
- You worry about how you will pay for major repairs. More people worry about this than you think.
- You drive a make or model that is known to be unreliable.
- You drive a car that is broken down before.
- You would rather pay a little bit each month, then must pay a lot all at once.
- You like having someone to turn to when things go wrong.
- You love your car and cannot imagine life without it.
If you do decide a vehicle service contract is right for you, congratulations. In our opinion, making that initial decision is the hardest part. Now we will help you break down what you should be looking for with a vehicle service contract.
Research Your Car’s Most Common Issues Before You Buy
Finding the right vehicle service contract for you starts with figuring out where your car might run into issues down the road.
Do not assume that just because you have a make or model that is known to be reliable that you will not run into issues. Even traditionally reliable brands do have problems.
Some model years will inevitably have more problems than others. Typically, this happens when the new model is dramatically different than the previous model year.
To help you out with the research process, we have created a vehicle assessment sheet which you can find on the last page of this buyer’s guide. We highly recommend you print it and fill it out. Most people do.
Click here to go to the vehicle assessment sheet.
How To Avoid The Dreaded “Car Warranty Scam”
“We have been trying to reach you about your car’s extended warranty” says the robotic sounding male voice on one end of the line.
How many times have you heard this one before?
These calls, at the very least, are annoying as all hell. For some, they can be expensive as all hell.
The first major car warranty scam made headlines in 2010, when the President and Vice President of Transcontinental Warranty were arrested for numerous violations of the SCAMS act. These crooks used robocalls to reach millions of households, where they offered “an extension of the manufacturer warranty”
You can read more about the case (and final sentencing) here.
Unfortunately, these scams still take millions of dollars from consumers every year, which underscores why it is so important to find a reliable vehicle service contract company.
In 2016, the Federal Trade Commission returned more than $4 million in refunds to nearly 6,000 consumers who were conned by a company using robocalls to hawk their vehicle service contracts.
Those who purchased the coverage quickly found it was far less than what the sales representatives had told them. Even worse, those who tried to secure a refund found it almost impossible to do so.
These scams work for four main reasons:
- The misrepresent (or outright lie) about your car’s warranty expiring to scare you into buying.
- They misrepresent (or outright lie) about their connection to your car’s manufacturer
- They use high pressure sales techniques including “deals” that are only good for 24 hours.
- They dial the s*** out of your phone.
Naturally, this invites the question. How do you tell the good from the bad?
10 Ways To Tell A Scam Company From A Legitimate One
1: A legitimate vehicle service contract company will NEVER call you without your consent first. In fact, more than 60% of our first-time members call us directly instead of us calling them after they fill out a contact form.
2: A legitimate vehicle service contract company will tell you exactly how many times they will try to get in touch with you. For our part, once you fill out a contact form, we will try 10 times to reach you over the course of a month. If we do not hear from you, we stop calling you unless you call us directly.
3: A legitimate vehicle service contract company will put you on the DNC (Do Not Call) list if you ask. Scam companies will ignore this request and continue to call.
4: Scam companies will use robocalls. We do not. We have over 300 vehicle protection specialists on staff so every time you call, you will speak to a real person.
6: If you do get on the phone, ask questions. Scammers will either avoid answering your questions or give vague answers. Our vehicle protection specialists undergo weeks of dedicated training each year to ensure they can answer every question you might have.
7: Scammers will pressure you to make the sale, instead of working to make sure the coverage is right for you. Our agents are trained to only accept those who can benefit from vehicle protection.
8: A legitimate vehicle service contract company will never claim to be affiliated with your vehicle’s manufacturer.
9: A legitimate vehicle service contract company will let you cancel at any time. Scammers will be exceedingly difficult to get in touch with. We give our members a 30 day, no questions asked, full refund guarantee.
10: A legitimate vehicle service contract company will directly administrate the contract in addition to selling it. We one of only 3 companies in the entire United States that are legally authorized to do this.
What Is A Directly Administrated Vehicle Service Contract?
There are 2 types of vehicle service contract companies: direct providers, and non-direct providers.
If a company is a direct provider, it means that the same company who sells you your policy will also be responsible for paying any claims on it.
There are only 3 companies in the United States who can legally do this, and we are one of them.
A non-direct provider will still sell you a contract, but once you sign on the dotted line, your claims will be paid by another company, called the 3rd party administrator.
At the best, this can lead to hours of frustration due to communication challenges. At the worst, your repairs may not be paid for.
In our opinion, you should always choose a direct provider.
Why Choose A Direct Provider?
There are 3 main reasons to choose a direct provider:
1: You Will Save Money With A Direct Provider
Direct providers can offer you a better price, which is why our policies cost, on average, 44% less than our competitors for the same coverage. That alone is enough for most people to switch, but if you are not convinced…
2: You Will Get Treated Like A Human Being, Not A Number
Non-direct providers and 3rd party administrators are all about numbers, and not much else. Let us explain.
When you buy a vehicle service contract with a non-direct provider, the non-direct provider receives a flat fee from the 3rd party administrator. Then, your contract is transferred over to the 3rd party administrator who is responsible for paying your claims.
At this point, the non-direct provider does not have to worry about you, because you are the 3rd party administrator’s responsibility.
The 3rd party administrator then receives your contract at a loss, which incentivizes them to pay as few claims as possible so that they can make their money on your contract. Accordingly, the reviews for most 3rd party administrators are terrible.
Unfortunately, consumers still end up stuck with these terrible contracts because these 3rd party administrators team up with marketing companies that disguise what is really going on behind the scenes.
There is a large vehicle service contract company whose TV commercials you have probably seen. They feature several celebrities, including Ice-T and Chris Berman.
But all is not as it seems.
Scroll down to the bottom of their website and you will see this disclaimer:
Disclaimer: […] is a nationwide company marketing vehicle service contracts on behalf of leading third-party administrators.
This little piece of text tells you everything you need to know.
The so called “leading third-party administrator” that this company prefers to use has a whopping 1.5-star rating on the BBB for a reason.
You can choose to deal with this, or you can deal with a direct provider like us.
3: Direct Providers Pay Your Claims Faster
All your information is kept in house with a direct provider, which means your claims will be paid far quicker than they would with a non-direct provider.
You Can Get A Vehicle Service Contract Even If Your Car Has Pre-Existing Conditions
Most companies will not sell you a policy if your car has pre-existing conditions, such as the check engine light being on. We will, however.
The repair for your pre-existing condition will not be covered, but our trained claims specialists will still work with you to ensure you get the best price on the repair. Most people can save anywhere between 10-30% with our help, even if the repair will not be directly covered.
Before You Buy, Make Sure You Choose The Right Vehicle Service Contract Company
Once you are ready to start shopping for your own vehicle service contract, there are several factors that you should consider.
Figure Out What Is Covered
This is where the vehicle assessment you did earlier will come in handy. When choosing a company, you want to look for a company that gives you options to tailor the coverage towards your vehicle’s needs.
Using your vehicle sheet, check each company’s website to make sure the component groups you need covered are covered.
Look For Independent Reviews
While a company may appear to have great reviews on its website, these can be easy manipulated by untrustworthy companies. We recommend you stick to independent, 3rd party reviews. Be careful though, as certain 3rd party review websites can be paid off by less than reputable companies. We recommend using Better Business Bureau or Consumer Affairs.
With the BBB specifically, pay attention to the user reviews, not the accreditation. BBB is a business, after all. To get accredited you must pay a certain amount each month.
User reviews are from actual people, not businesses.
Look for reviews that indicate how helpful the company was from those who have coverage. You should also be aware that many 1-star reviews are often given by mistake; as it is easy to get confused by which company is which.
Is The Company Trustworthy?
Just because you find a company on Google does not mean it is trustworthy. Do a little bit of digging on each company you are considering. You will want to answer questions including:
- How long have they been in business?
- Who are they endorsed by?
- Do they have good reviews across multiple websites?
- Do they make outrageous or unclear claims?
- Do they have insurance backing up their policies?
Call Each Company You Are Considering Before Purchasing
You can learn a lot about each company by understanding who they hire. It is best to call each company directly, as opposed to waiting for them to call you to make the process quicker.
You want to look for:
- Agents who are helpful and willing to answer your questions.
- Agents who will gladly walk you through the fine print on the contract. Ask them specifically what is not covered.
- Agents who work to find the right contract for you
- Agents who are patient and give you time to decide
You want to avoid:
- Agents who sound nervous.
- Agents who will not answer your questions
- Agents who put you under pressure to buy right this second
- An agent who promises “everything” is covered
Compare The Major Vehicle Service Contract Companies Before You Buy
1: Prices taken on a 2015 Toyota Camry with 100,000 miles. Your price and plan may vary.
Be Aware Of The Waiting Period
Once you sign up for a plan, there is usually a short waiting period before you can use your coverage. Normally it is between 30-60 days / 1,000 miles. Sometimes it is both.
After the waiting period is over, any covered breakdowns you experience will be covered by your vehicle service contract.
Be Aware Of The Wear And Tear Parts In Your Car
Vehicle wear and tear is damage or deterioration resulting from normal use and exposure. For example, a bearing in the alternator that begins to wobble and squeak because it is worn down would fall under the category of vehicle wear and tear.
However, most vehicle protection plans will cover a repair on a covered component that has worn beyond the “manufacturer’s tolerance” (meaning the part has not lasted as long as the manufacturer intended). It is important to note that the more miles a vehicle has, the more likely it is that it will require a repair due to a worn out part (wear and tear), rather than due to a prematurely worn part or mechanical breakdown.
Wear and tear damage is typically not covered by your vehicle service contract.
Some common wear and tear parts include:
- Brake pads
- Windshield wipers
- Spark plugs
- Your paint and body panels
- Interior carpeting and leather