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How Different Is Auto Service Contract From A Warranty?

Let’s clearly accept that auto service is not a warranty, even though your service provider calls it an extended warranty. Most of the car-owners purchase these contracts in fear of any catastrophic failure on their car, which may take huge money. So, a service contract transfers risk from the vehicle owner to the contract company and is basically insurance cover for high repairing costs.

It all depends on how much money you would pay for the contract, and which types of protection you need. You can slowly add to it over time, and any expensive repairs come up. You will certainly have the cash to pay for it, and, if you don’t need an expensive repair, you still have your money.

Most Contracts Are Offered By 3rd Party

Most contracts are offered by 3rd party providers who may not be around after the sale. So, you should heed with cautious, even contracts are offered by the dealer. In the US, many states have insurance regulations which are applied to service contracts and require companies to:

  • Maintain a certain financial reserve to pay claims.
  • Base their contract fees on expected claims.
  • Seek approval from the state insurance office by paying premiums or contract fees.

Some service contract providers earn huge profits as the cost they offer for repair often far exceeds the cost of original repairs. So, it is a good idea to be informed of what regulations your state does or does not for having Auto Car Protection.

Type of Auto Service for You

You will generally find two types of service contracts:

  1. An auto contract which parts such as the crankshaft, connecting rod, wrist pin, rocker arm, camshaft, camshaft follower, timing chain, main bearings, roller bearings, and needle bearings.
  2. A contract that covers everything except a short list of items not covered such as brakes, filters, belts, battery, and other maintenance items.

So, are you ready to have your contract? Just reread this post to have some basic clarity of the service contract.


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