The Difference Between Warranties and Service Contracts

Warranty, extended warranty, service contract—if you’re shopping around for a new or used vehicle, you’ve probably heard the terms floating around, but what do they actually mean? What do they cover? And do you really need them? While they all aim to protect you and your car from costly repairs, there are key differences between these auto coverage contracts to consider when shopping for a new car.




A car’s warranty is a guarantee provided by the manufacturer that your vehicle will continue to function for a certain amount of time. For many manufacturers, the coverage interval is usually 36 months or 36,000 miles—whichever comes first. If you experience a breakdown or find a manufacturing defect while your warranty is still active, the cost of the repairs may be covered or partially covered by the manufacturer. After the warranty expires, it comes out of your own pocket. However, different warranties cover different problems, so make sure to read the fine print before agreeing to anything.

For new cars, the price of the warranty is included in the initial purchase of the vehicle, and some used car dealerships also offer warranties if the vehicle has been maintained or repaired to a certain standard. You’ll likely be offered an extended warranty, which offers coverage beyond the original warranty, though it may have new terms. When deciding whether or not to purchase an extended warranty, consider how long you’ll own the vehicle, what repairs will be covered, and how prepared you’d be to handle an unexpected repair without financial assistance.

Service Contracts

First of all: while some companies use “extended warranty” and “service contract” interchangeable, they are not the same thing, and a service contract is not classified as a warranty under federal terms. Service contracts are sold by vehicle manufacturers, auto dealers, or third-party companies, can be purchased at any time during the car’s life, and usually don’t offer any benefits until the car’s original warranty has expired.

Service contracts are used to help you maintain and fix your car by offering coverage for certain repairs. Unlike the warranty that comes with the vehicle, service contracts are a separate cost—depending on the specific terms, the contract will usually have an initial cost with a deductible that is paid when you get repairs done.

Just like with car warranties, service contracts differ depending on what they cover and what they cost, so be sure to compare your options. It’s important to thoroughly understand the terms of the repairs your vehicle will receive. Some service contracts have geographic limitations, meaning if you break down out of state, your contract may not cover the repairs. Others have specific maintenance schedules you need to follow—if you don’t, it can void your contract.

Questions about your warranty or service contract coverage? Contact the auto experts at Advanced Repair, and we’ll help you get back on the road.

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