What is a vehicle service contract?

A service contract, also called an extended warranty, is a contract that covers certain vehicle problems or repairs after the dealer’s or manufacturer’s warranty expires. You might find one of these offered through an auto manufacturer, car dealer or warranty administrator.

How does a vehicle service contract work?

Sometimes referred to as an extended warranty plan (though not officially a warranty by legal definition), a vehicle service contract is a paid plan that helps cover the costs of any repairs needed once the limited warranty has expired. As the car ages, the likelihood of it needing repairs rises.

Is it worth buying a vehicle service contract?

If you are buying a new car and the length of the service contract is similar to that of the manufacturer’s warranty, it’s probably not worth your money. Most new cars don’t require many repairs during the first few years. And if your car does need repairs, they’re likely to be covered by the manufacturer’s warranty.

What is the difference between a warranty and a service contract?

Warranties are included in the price of the product. … A service contract is sometimes called an “extended warranty,” but service contracts are not warranties. A service contract can help you fix or maintain your product for a specific time — like a warranty. But, unlike a warranty, service contracts cost extra.

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How much should I pay for a vehicle service contract?

A typical contract can cost anywhere from a few hundred dollars to $1,000. However, on average, most vehicle service contracts cost somewhere between $350 to $700 per year.

Can you cancel a service contract on a new car?

A: Yes. California law provides that you can cancel your service contract at any time, and receive a refund. … The cancellation or administrative fee cannot exceed 10% of the price of the contract, or $25.00, whichever is less.

What is a service contract refund?

The obligor must give you a full refund of the VSC purchase price if you meet all of the following requirements: • You cancel the VSC within 60 days after receiving the contract, or 30 days if your car is used and came without a manufacturer warranty. …

What are the two types of vehicle service contracts?

There are two main types of vehicle service contracts: a powertrain warranty and a bumper-to-bumper warranty. A powertrain warranty covers the components that make your vehicle move: the engine, transmission, transfer case, drive axles, and other related components.

What are service contracts?

Service Contracts are agreements between a customer or client and a person or company who will be providing services. For example, a Service Contract might be used to define a work-agreement between a contractor and a homeowner. Or, a contract could be used between a business and a freelance web designer.

Is a service contract insurance?

A service contract is insurance but for the fact that virtually every state has explicitly declared it not to be insurance, which injects a lesser degree of regulation, taking it outside most rigors of insurance regulation.

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Is a service contract an extended warranty?

Service contracts are sometimes called an “extended warranty,” but they’re not a warranty as defined by federal law. They’re sold by car manufacturers, dealers, and independent companies, you can buy them anytime, and prices and coverage vary widely.

What is the difference between a service contract and a maintenance contract?

Essentially, maintenance is what you get regularly done on your vehicle to make sure it stays in fighting form. Maintenance is something that’s scheduled – like an oil change – whereas service is when you need something specific fixed or tuned up that’s outside of your regular maintenance schedule.

What are the basic terms of a service contract?

Important Contract Terms for Service Agreements

  • Term/Duration: …
  • Responsibilities/Scope of Work: …
  • Payment Terms: …
  • Dispute Resolution Terms: …
  • Intellectual Property Rights: …
  • Liabilities/Indemnification: …
  • Modifications/Amendments: …
  • Waiver:

How much do dealers make on extended warranties?

Each warranty plan a dealership sells can add up to $2,000 per purchase to its bottom line. The average dealer generally makes up to half of the selling price of an extended warranty. For example, if you purchase an extended warranty for $2,000, the dealer may make a profit of up to $1,000.