Vehicle Service Contract

A vehicle service contract is a written agreement between a consumer and a provider - such as a manufacturer, dealership, or third-party company - that promises to cover specified repair and maintenance costs for a certain duration or mileage. Unlike a manufacturer’s warranty, which is included with a new vehicle, a service contract is purchased separately and often extends coverage beyond the standard warranty period.

Service contracts can range from basic powertrain coverage to comprehensive “bumper-to-bumper” protection, and they may include extras like roadside assistance, towing, and rental car reimbursement. For consumers, service contracts offer financial protection against costly repairs and help budget vehicle expenses more predictably.

However, they are not always a good value: exclusions, limitations, and claim processes can make them frustrating, and some contracts exclude wear-and-tear items or common breakdowns. For dealerships, vehicle service contracts are highly profitable and often presented as back-end products in the F&I office.

For providers, they create recurring revenue while shifting risk from the consumer to the contract administrator. Consumers should compare service contract costs against the expected reliability of their vehicle, typical repair expenses, and the length of time they intend to keep the car.

Manufacturer-backed service contracts are often more reliable and easier to use than third-party plans, though they may cost more. Understanding service contracts allows buyers to weigh peace of mind against real financial benefit.

For some, they provide security; for others, they represent an unnecessary expense if the vehicle is dependable or covered under warranty.