What is a vehicle service contract?

Modified on Sat, 15 Jul 2023 at 07:48 PM

American Auto Shield vehicle service contract 101 customer service rep computer and books

Vehicle Service Contract 101

Vehicle service contracts are designed to protect consumers and their pocketbooks against unexpected, costly mechanical breakdowns or failures. Plans cover the costs associated with auto repair - including parts, labor, and sales tax - for covered mechanical repairs.

Vehicle service contracts have different coverage levels and benefits, depending on the type of contract purchased and the place of purchase; therefore, coverage for any given repair is based on the terms and conditions of the consumer’s particular plan. 

A vehicle service contract is commonly but incorrectly referred to as an "auto warranty" or “extended auto warranty”. The difference among the three is subtle but important: 

  1. Auto warranty: Provided by motor vehicle manufacturers and included with the original vehicle purchase
  2. Extended auto warranty: Offered by car dealers
  3. Vehicle service contract: Must be purchased separately and can be purchased at any time

A similarity among the three is also important:

Much like a manufacturer’s auto warranty, or an extended auto warranty available through car dealers, vehicle components that are specified for coverage will be covered within the terms of the specific contract, provided regular maintenance has been properly and regularly performed as defined by the terms and conditions of the contract.  

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