Vehicle service agreements are contracts between a seller and buyer to provide or pay for repairs for a specific period or distance. They may not be necessary if covered by a manufacturer’s warranty and do not cover routine maintenance. Contracts may be extended but may have limitations and voids. Terms may be unfamiliar, and coverage may vary.
Vehicle service agreements are legal agreements between a seller and a buyer, which state that the seller will provide or pay for certain repairs, should they be needed on a vehicle for a specific period of time or distance. The seller, in this case, refers to the person selling the contract, which can be different from the dealership or the person selling the vehicle. Typically, vehicle service contracts extend over a period of years, miles or kilometers and expire whenever the first threshold is passed.
Buyers considering vehicle service contracts should keep in mind that contracts aren’t always necessary and some things can be duplicated in the manufacturer’s warranty, which is usually included in the price of a new vehicle. Service contracts generally do not cover routine maintenance such as oil changes and new tyres. Some may include provisions for tire damage caused by road hazards. Also, service contracts may only pay for a certain percentage of some repairs.
Often, vehicle service contracts are only valid for a certain amount of time. For example, a contract may offer protection for five years or 50,000 miles (80,467 kilometers), whichever comes first. Any failures occurring after this time period will not be honored by the contract seller.
Some companies may offer to extend the length of vehicle service contracts that are nearing their expiration date, especially if the claims history has been favorable or if they are comfortable with the type of car they drive. These contracts are usually for a shorter period of time than the first contract, but the price could be the same or even higher. The reason for this is that older vehicles tend to have more things go wrong more often. Thus, the seller of the contract seeks to provide protection against potential loss.
In addition to time and distance travelled, a number of other situations could void vehicle service contracts. Failure to perform necessary maintenance, such as changing the oil, is one example. However, this typically only applies to maintenance that may involve the damaged component. For example, a service contract seller typically cannot refuse to pay for repairs to a leaking radiator just because an oil change schedule has not been strictly followed. However, in the event of engine damage due to lack of adequate lubrication, such repairs may be refused.
Some individuals or entities that sell vehicle service contracts may use terms that are standard in the industry, but are unfamiliar to many people. For example, a bumper-to-bumper warranty or service contract, sometimes referred to as full coverage, covers almost anything that could go wrong with the entire vehicle, such as window handle breakage, for example. Drivetrain warranties or protections usually only cover engines, transmissions, and drive axles.
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