A Brief 101 on Vehicle Service Contracts and Warranties

When you buy a vehicle new, it automatically comes with a factory warranty. This is provided by the manufacturer and is not something you can choose to have or not – although you can sometimes extend it. If you purchase a used vehicle, however, then the warranty will probably have lapsed already. This means that you may want to take out a vehicle service contract instead.

Types of Vehicle Service Contracts

A vehicle service contract is offered to the buyer of a vehicle by the dealership, but is actually covered by a third party provider such as Accelerated Service International (ASI). Different contracts are available and it is important that you learn to recognize these differences, so that you purchase the one that is right for you.

The Powertrain

The powertrain is a contract that only covers the transmission and the engine. It is the most basic of all and is often covered for a very long time (up to 10 years) by the factory warranty. However, you could add it once you have driven 36,000 miles (or three years, whichever comes first) and your bumper to bumper warranty has expired.

The Component

Component plans cover you for elements outside of the powertrain. Exactly what is covered varied by the administrator. Hence, you should look not at what the dealer tells you, but what companies like ASI offer. They will tell you exactly which components of the car are and are not covered.

The Bumper to Bumper

This is an exclusionary plan. This means everything is covered, expect anything that is specifically listed. Maintenance items are usually excluded.

Contract Terms

Term of Coverage

This tells you how long your car will be protected. It usually is a certain number of months or a certain amount of miles, whichever of the two comes first. Exactly what the term of coverage is varies depending on your contract and on the administrator, so do look into this.

Waiting Period

Usually, there is a 1,000 miles/30 day waiting period included in a service contract. This is because dealers know exactly what condition a certain car was in, and they should know that it won’t break down. In fact, dealers often have a 30 day warrant or guarantee as standard on any vehicles they sell. It basically means that your service contract will only come into effect after that time period.


A service contract is a type of insurance. This means that you will probably have to pay a deductible as well. The higher your deductible, the less you pay towards your insurance, another consideration you should look in to.

If you have decided that you want a vehicle service contract, it is important that you choose the right one. Sometimes, dealers will tell you that they only work with certain administrators, but this is simply not true. In fact, you can take out a contract without going through a dealer at all. Hence, make sure that you consider the terms and conditions, the pros and cons of a certain administrator, and their experience and reputation.