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JUL 26, 2022

What is a vehicle service contract and extended vehicle protection?

Keep your vehicle running smoothly with extended protection plans.

By

Caribou

9 min read

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When it comes to keeping your car running smoothly, it’s good to have a plan which gives you peace of mind. A vehicle service contract (VSC) offers exactly that, providing a paid plan that can help cover large costs once your warranty expires – so you can feel confident that there’s plenty of life left in your vehicle. Below, we examine how you can feel confident on the road with a VSC.

Introduction to vehicle service contracts  

Our cars can sometimes keep us awake at night. We have to look after our vehicles, keep them in good operating condition, and spend money on their maintenance. This can be even more prevalent with modern vehicles which have more than 30,000 individual parts. It’s inevitable that vehicles will develop problems once in a while — the only question is how to deal with those problems.

New cars are built with the latest technology. They have more potential for problems with electronic parts and computers when compared to their older counterparts. While your car can often last for many thousands of miles, it can quickly give you a service headache with a significant impact on your wallet if a major component fails and repair costs add up quickly. In light of these concerns, a vehicle service contract could prove to be a solution worth considering to help maintain your car.

What is a vehicle service contract? 

 A vehicle service contract offers drivers a safety net which helps repair covered parts. The contract is a paid plan that offers vehicle repair protection and is often called an extended vehicle protection plan. A vehicle protection plan is another name for a vehicle service contract. It can help to cover costly repairs to both newer and older used vehicles. The contract normally takes effect once your vehicle warranty has expired.

While vehicle service contracts are sometimes referred to as an “extended warranty”, this terminology is not exactly correct. There are differences between the vehicle service contracts and extended warranties. One primary difference is that the VSC doesn’t extend a manufacturer’s warranty but instead can mirror some of the same benefits. For example, the contract may cover some of the same repairs to auto parts, drivetrain components, and vehicle systems. It can also have some additional protections that the original warranty didn’t have.

If you have a new car, it may have come with a factory warranty. Once your warranty has expired, it will be up to you as the driver to pay out of pocket for any issues to your vehicle — which can be expensive. This is why a VSC offers a helpful solution by helping to cover the costs of specific parts of a vehicle. The exact parts and repair circumstances depend on the contract and coverage terms. Signing for a VSC is, in essence, paying for peace of mind when repairs fall under the plan coverage.

Contract terms and plan lengths

The term of the service contract is set when you sign up for it. Normally, contracts run in lengths of months or miles. Two of the most common terms are 48 months or 60,000 miles and 60 months or 80,000 miles. These lengths mean the coverage will last for 4 to 5 years or 60,000 to 80,000 miles from the time of signing.

The cost of the extended vehicle protection depends on the term coverage. Maintaining the contract has a monthly fee which can range anywhere from $30 to $40 a month. To see an exact VSC quote, you will need to apply for coverage with your vehicle.

Find extended vehicle protection

Thinking about getting a vehicle service contract? Add one to your refinanced car loan! See if you can lower your interest rate through Caribou.

How to get a VSC with extended vehicle protection

There are a few ways you can add a vehicle service contract or extended vehicle protection plan to your car to help protect against major breakdowns and repairs. First, you can purchase it separately for your vehicle from a service provider. Second, you can add a VSC onto your refinanced car loan. This latter option is a popular route to getting a contract because it can help you lower your auto loan interest rate as well as provide maintenance coverage for your vehicle.

How does a vehicle service contract work? 

Like all contracts, vehicle service contracts may have stipulations and requirements for your car to be eligible. When you sign up for the contract, a dealership or third-party offers coverage for a wide range of potential repairs (based on the contract) that may cost thousands of dollars. To qualify, your car must meet plan requirements including age, mileage, title status, and initial operating condition stipulations.

The age of your car, for example, can be an important factor. Older cars are naturally more likely to need repairs or have catastrophic failures as they are driven. Most providers offering a VSC will have an age range that your vehicle will need to meet such as be manufactured within the last 10 years.

Other factors include the amount of mileage that your car has on the odometer since more mileage equates to more wear and tear on the vehicle. For example, qualifying vehicles will usually need to have less than 100,000 miles. Providers will also likely pay close attention to any vehicle modifications, and some providers are unlikely to offer a VSC if your car has significant aftermarket components, modifications, or additions like a custom turbo or supercharger.

The vehicle title status is another key factor. To qualify for the service contract, the car’s title must be clean and not labeled as salvage or branded since these would bring the car’s roadworthiness into question. Salvage and branded titles indicate the vehicle was written off by insurance companies due to damage equating to more than the vehicle was worth. Because of this, they do not usually qualify for extended protection coverage.

What is included in the extended vehicle protection with the VSC?

The items included in your vehicle service contract are dependent on the specific contract that you sign. The contract will list the covered items along with damaging factors which are situationally dependent. Using these terms and details of the contract, you can know which parts of your vehicle are covered for repairs if something goes wrong. Remember that covered situations often only include catastrophic events like failures of parts. They do not include worn out part replacement due to normal vehicle operating conditions.

The covered parts can include:

  • Engine (gas/diesel) and its components such as intake, exhaust manifold, air filter, water pump, and fuel pump

  • Transfer case parts for 4x4 vehicles

  • Drive axles parts

  • Factory turbo and supercharger parts

  • Air conditioning and heating systems

  • Refrigerant used in air conditioning repairs

  • Suspension parts, arms, springs, and associated electronic controllers

  • Steering components like joints, arms, links, and electronic height level systems

  • Cooling system and radiator parts like the radiator and thermostat

  • Hybrid components for the IMA control unit

  • Gasoline/diesel fuel system parts

  • Electrical components

  • Brake system  parts and components

  • Seals and gaskets

  • Additional parts

Extended vehicle protection coverage levels

Service contracts come in different tiers like standard, comprehensive, and exclusionary coverage levels. You get what you pay for, and spending more usually expands the coverage for more vehicle parts — leading to more comprehensive coverage.

Standard vehicle service contracts normally include some of the major parts from primary systems like the ones shown in the list above. This plan can include parts around and in the engine, transfer case, drive axles, transmission, and other subsystems. These contracts provide enough coverage to take care of most components but normally do not include smaller parts or several of the more expensive subsystems.

Exclusionary coverage is the highest level plan with the most coverage and often the most value. It provides a list of parts which are not covered rather than a list of what is covered. To learn more about this level of coverage, talk to your representative for more information and a complete list of which parts are excluded.

Powertrain coverage can also be included in certain contracts and provides covered repairs to the car’s drive components. These components include the engine, driveshafts, transmission, and cylinder block. The powertrain is crucial to a vehicle’s movement and has a lot of expensive moving parts — so opting for this coverage could be useful.

Vehicle service plan protection

When it comes to getting extended vehicle protection, more is often better. Vehicle service plans can help to cover unexpected repairs and costs.

Transferring coverage and add-ons

Alongside actual repairs, the services you may be entitled to in the contract can include on-call roadside assistance, towing, rental reimbursement, and even a trip interruption reimbursement. Roadside assistance provides help if you are stranded. Towing assistance can help you make it back to a repair shop. Rental reimbursement can help you pay for a temporary vehicle to use. Trip interruption reimbursement can pay out a daily allowance if your car breaks down more than 100 miles away from home.

Transferring the coverage depends on the terms of the contract. Normally, the VSC coverage is tied to the vehicle. If you needed to sell the vehicle in the future, you could transfer the plan so the new owner can benefit from it.

Vehicle service contracts versus factory warranties

It’s important to differentiate between vehicle service contracts and factory warranties. While they both aim to protect drivers from expensive mechanical breakdowns, they are two separate types of coverage and should be treated as such.

Factory warranties are usually included as part of the purchase of a new car or a certified pre-owned (CPO) vehicle, along with new car financing. A warranty is a statement from the seller or manufacturer that confirms the vehicle is free from defects in materials or workmanship. Any discovered defects over a certain period of time or mileage will be repaired free of charge at an approved service center. For example, a warranty may last 3 years or 36,000 miles.

A vehicle service contract, meanwhile, is only relevant once a warranty expires, which is why it’s often referred to as vehicle service coverage. Keep in mind that the VSC is an add-on that is purchased separately to your vehicle once it has met the contractual eligibility criteria. Instead of covering all parts of a car, often a service contract will cover catastrophic failures to major parts and components.

Service contracts do not cover parts that need repair or replacement due to normal wear and tear along with non-essential part replacements. This is because VSCs are not as comprehensive as factory warranties. The repairs will still need to be completed at approved repair shops or dealers.

Wrapping up vehicle service contracts

Cars need maintenance and having a VSC can be a good fall back option if major components suddenly fail and your vehicle needs repairs. Driving is a necessity for many of us, and your vehicle service contract can provide invaluable help when you need it the most. While major, unexpected repairs on any vehicle can be complicated, a VSC helps to get your vehicle back on the road. Have questions about vehicle service contracts? Let us know by sending us a chat message!

VSC FAQs

  • What is a vehicle service contract? A vehicle service contract is a paid plan that offers vehicle repair protection. It is often called an extended vehicle protection plan. The plan can help to cover costly repairs to both newer and older used vehicles.

  • When does a VSC take effect? The contract normally takes effect once your vehicle’s factory warranty has expired and you have completed all of the onboarding steps.

  • What is covered under a service contract? The contract may cover repairs to auto parts, drivetrain components, and vehicle systems as listed in the contract’s details. It can also offer some additional protections that were not originally included in the factory warranty like roadside assistance.

  • How long does a vehicle service contract last for? Two of the most common VSC terms are 48 months or 60,000 miles and 60 months or 80,000 miles. These lengths mean the coverage will last for 4 to 5 years or 60,000 to 80,000 miles from the time of signing.

  • How much does a vehicle service contract cost? The contract normally has a monthly fee which can range anywhere from $30 to $40 a month.

  • What situations are covered with extended vehicle protection? The contract will list the covered items and situations. Catastrophic part failures are normally included while normal wear and tear from driving is not included.

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NMLS #1746612
1.877.445.0070

Mon - Fri: 9am - 8pm EST

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1717 Rhode Island Ave, NW, Suite 500 Washington, DC 20036

Caribou Insurance Services, LLC
1.877.255.2660
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insurance@gocaribou.com


* This information is estimated based on consumers who were approved for an auto refinance loan through Caribou on or after 1/1/2022, had an existing auto loan on their credit report, and accepted their final terms. As of 9/27/2022, borrowers who refinance save an average of $111.16 per month. Refinance savings may result from a lower interest rate, longer term, or both. There is no guarantee of savings. Your actual savings, if any, may vary based on interest rates, the repayment term, the amount financed, and other factors.

+ To check the refinance rates and terms you qualify for, we conduct a soft credit pull that will not affect your credit score. However, if you choose a loan product and continue your application, we or one of our lending partners will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

++ Social security number is required should you choose to move forward in the loan application process.

** APR is the Annual Percentage Rate. Your actual APR may be different. Your APR is based on multiple factors including your credit profile and the loan to value of the vehicle. APR ranges from 2.83% to 36.00% and is determined at the time of application. Lowest APR is based on loan amount of $45,000, 36 month term, and is available to borrowers with excellent credit and only in certain states. Conditions apply. Advertised rates and fees are valid as of 11/1/2022 and are subject to change without notice. Insurance savings will not result from lower APR.

Terms and Conditions apply. Caribou reserves the right to modify or discontinue products and benefits at any time without notice. Participating lenders, rates and terms are also subject to change at any time without notice. The information you provide to us is an inquiry to determine whether our lenders can make you a loan offer. If any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. We do not guarantee that you will receive any loan offers or that your loan application will be approved. If approved, your actual rate will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Offers not available in MA, MD, MS, NE, NV, WI, WV.

Insurance products offered through Bindable and Caribou Insurance Services, LLC. Caribou is working with Bindable who owns MyLifeProtected and MassDrive Insurance Group, LLC, the licensed agent for all products.