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What Is An Extended Vehicle Service Plan And Is It Worth It?

  • Car Care Tips
  • Renee Martin
  • 6 minutes

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Don’t you hate having a car breakdown just after your manufacturer warranty expires? With an Extended Service Contract (ESC), you can reduce the expenses from unforeseen mechanical failures. 

You don’t necessarily think too much about the warranty when you buy a new car. Since the manufacturer guarantees it for a certain period, you don’t pay too much attention to it – until the car needs repairs! And woe befall you if your manufacturer’s warranty has expired – you’ll have to shell out all the money from your pocket. There’s an easy way to avoid such situations – buy an Extended Service Contract (ESC) or Extended Warranty.

Let’s break down the important things you should know about ESC:

What Is an Extended Vehicle Service Plan?

An Extended Service Contract – also called  Vehicle Service Contract or Extended Warranty – is an optional warranty that you can buy to help pay for any unintended mechanical repairs and failures once the manufacturer’s warranty expires. Typically, for a new car, the manufacturer’s warranty covers any damages that may occur for three years or 36,000 miles. This is enough if you only intend to own the vehicle for 3 years or less.

However, if you intend to keep the car for longer, you either need to save up money to pay for accidental damage after the warranty period – or you can buy an Extended Service Contract (ESC) and stop worrying! Dealerships and third-party providers offer Extended Vehicle Service Plans for a much lower cost than the original manufacturer.

What Does An Extended Service Plan Cover?

Extended Service Contracts come with different plans and templates, allowing you to choose what to include. Typically, ESCs exclude routine maintenance, tire replacements, and oil changes. However, some select plans have the same coverage as the original warranty and cover issues with the engine, transmission, and electrical systems.

  • The length of ESC coverage ranges from one to eight years
  • The mileage of ESC coverage ranges from 12,000 to 125,000 miles
Always read the fine print of the document to learn whether there are any limits to the ESC coverage – otherwise, you may end up paying out of your own pocket for exceeding limits. Certain manufacturers also account for depreciation – so they only pay partial expenses in some cases.

How Much Does An Extended Service Contract Cost?

Extended Service Contracts can cost anything between $1000-3000 depending upon the kind of coverage, make and model of your car, and mileage included. Typically, extended warranties from dealerships are more expensive, while third-party providers have more affordable service plans.

Some providers will also need you to pay a deductible per repair or service visit. Ensure that the policy on deductibles is clearly mentioned in the ESC, or you may end up paying deductibles for every trip to the repair shop. If you are planning to refinance your existing auto loan, you can add ESC to the refinanced loan and save money.

Benefits of an Extended Service Contract

Getting an extended warranty is definitely a good choice for the following reasons:

  • Vehicles with good ownership value and mileage will need extended warranties, as they are owned for an average of more than 5 years.
  • Out-of-pocket expenditure on repairs can often be expensive, costing more than $1000 dollars in some cases
  • Extended Service Contracts can be added to your refinanced auto loan easily, avoiding the need for a separate plan
  • Service plans are also transferable from one owner to another if you choose to sell the car.

Drawbacks of an Extended Service Contract

If you don’t read the contract conditions right, an extended warranty can even backfire and make you lose money.

  • Usual Vehicle Service Plans do not cover everything under the original manufacturer’s warranty
  • Plans that include full coverage can be as costly as $3000, depending on the make and model of the car
  • You may have to pay a deductible for every visit to the repair shop
  • Some plans may dictate that you can also visit a designated repair shop, and may not give you a choice
  • According to ConsumerReports, almost 55% of drivers haven’t used their extended warranty. If you take good care of your vehicle, extended warranties can often be obsolete.

Tips For Buying An Extended Service Plan

Before buying an Extended Service Plan, use the following tips to understand if you really need an extended warranty.

  • Evaluate how long you want to own your car. If you intend to keep it for more than 3 years, it’s good to have added protection.
  • If you’re someone who is likely to cross the manufacturer’s mileage warranty limit quickly, you can take on an ESC to keep your vehicle free from wear and tear.
  • Are you someone who takes good care of your vehicle? If so, you may never need an extended warranty during the time you own the vehicle.
  • If you have a small emergency fund dedicated to mechanical repairs, then you will likely not need an ESC.
  • Ensure that service providers are insurance-backed and trustworthy.

How Can You Save Money While Getting a Vehicle Service Plan?

Taking on a separate vehicle service plan may be too expensive as an individual option. However, you can save money if you club it along with auto refinancing. Generally, folks who choose to refinance their car loan intend to keep their vehicle for a longer period, and will also need extended warranty to cover any mechanical costs.

You can use an auto refinance provider like Way.com to add ESC to your refinanced car loan and save hundreds of dollars in the process. You can also use a subscription like Way+ to get affordable roadside assistance, fuel, and towing facilities in case your car breaks down anywhere. It’s more likely to save you money that buying a separate extended warranty plan.

what is an extended service contract?

Does an Extended Service Contract Cost More?

On average, statistics show that vehicle owners with extended warranties spent more on repair costs than those that did not have a warranty. However, this may likely be due to poor plan selection and deductibles.

What Happens to the Vehicle Service Plan If I Sell My Car?

The vehicle service plan can be transferred from one owner to the other if you sell your car.

How Much Will I Get Back If I Cancel My Extended Warranty?

You are entitled to a pro-rated refund on the remaining warranty period. If the warranty is part of your loan, then the estimated amount will be deducted from your balance.

Does Changing Your Own Oil Void Your Warranty?

No, changing your own oil will not void your extended warranty. However, always make sure to use only the manufacturer-recommended brand of oil. Also, any problems arising from changing your own oil will not be covered by the warranty.

Read more blogs for info on finding top-rated airport parking, the best parking spots in your city, and affordable car washes near you.


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