Should I get a service contract for my car?

If you’re buying a new or used car, the salesperson might try to sell you an auto service contract to help protect against unexpected or expensive repairs. While a service contract might sound like a good idea, it could duplicate coverage you have through your manufacturer’s warranty.

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.

How much should I pay for a vehicle service contract?

On average, most vehicle service contracts cost somewhere between $350 to $700 per year. Total costs range from about $2,000 to $4,000. Before purchasing a vehicle service contract, you should consider how much you would plan to spend on repairs without one to determine whether it would make financial sense for you.

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Is a service warranty worth it?

Extended warranties provide two main benefits: You may save money. If your car needs a costly repair that’s covered under your extended warranty, the warranty could ultimately pay for itself — even if you have to cover a deductible and a portion of the bill. Provides peace of mind.

Is a service contract better than an extended warranty?

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.

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.

Can I cancel a service contract after signing?

There is a federal law (and similar laws in every state) allowing consumers to cancel contracts made with a door-to-door salesperson within three days of signing. The three-day period is called a “cooling off” period.

How does a service contract work?

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.

Are service contracts considered insurance?

Since a service contract is not considered an insurance transaction, the provider may purchase a commercial insurance policy (the CLIP) that shifts 100 percent of its liability to the licensed insurer.

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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. … Most often, Service Contracts include details such as deadlines and payment agreements.

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.

Why extended warranties are a waste of money?

Extended warranties are rarely worth your money. Products don’t break on their own, and when they do, the price of repairs is usually lower than what you’d spend on an extended warranty. … In most cases, it’s best to skip the extended warranty and use your extra cash to build up an emergency fund.

Should you buy the extra warranty on a used car?

In general, we don’t recommend buying an extended warranty on a used car. … This means you’ll likely spend more on the extended warranty — $3,000 or more, in some cases — than any repair costs your car may accrue during the period when the warranty stays valid.

How long can a service contract last?

Background: Paragraph 17.204(e) of the Federal Acquisition Regulation (FAR) establishes a maximum of five years, which includes the basic and all option periods, for contracts for services as well as for supplies.

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.

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What should consumers know before buying a service contract or extended warranty?

Before you sign a contract, check out the company’s reputation and consider how long it’s been in business. Do an online search with the name of the company and words like “review” or “complaint” to see if there are negative reviews of the company.