You’re looking toward the future. You’ve got a family, or maybe some dreams of having one, and a little financial certainty would go a long way. Maybe you just bought a car, or maybe your favorite ride has just been getting a little older. You know you want to keep it running, but you don’t want to break the bank. Instead, you want to create a structure so that if the worst happens, you’re financially secure. 

Vehicle service contracts are an increasingly popular tool people are purchasing to protect their future. With more and more Americans selecting VSCs to create financial security, there has never been a better time to learn about what these products are, who they’re for, and just what separates the good from the bad. 

What is a Vehicle Service Contract?

Fundamentally, a VSC, or vehicle service contract, is an agreement made between a consumer and a provider. Typically that consumer is purchasing for their own vehicle, though it is not uncommon for a fleet operator to protect all the vehicles under their domain. The agreement pertains to the consumer’s vehicle and the potential breakdowns that might occur. The provider agrees to pay for those breakdowns in exchange for a fee, paid in advance, by the consumer. 

The savvy consumer will note that this type of protection is different than auto insurance. Where auto insurance pays for repairs in the event of a collision, a VSC pays for damages in the event of a breakdown. 

Another misconception is that a vehicle service contract is a warranty. Although they are often referred to as extended auto warranties, a VSC is an agreement between two parties made after the vehicle has been sold. A factory warranty is priced into the cost of the vehicle by the manufacturer.

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Trust in the world of extended auto warranties

When it comes to VSCs, establishing trust between the consumer and the provider is essential. Knowing what’s covered and what’s not begins with transparency, and transparency begins with a conversation. While lots of companies will say that they offer VSCs, only providers honor the agreements. 

Sometimes third-party retailers, such as dealerships, will sell another company’s warranties leading to increased costs for the consumer, and a seller who is not knowledgeable about the product. Knowing who you are working with, and knowing that they are the ones who will follow through on the agreement you are making, can help you feel confident in your purchasing decisions. 

Finally, the purpose of the product is to provide you with the coverage you need. Understanding the different types of contracts on the market is how we begin to understand exactly which products we are looking for. 

Coverage Types

Typically, when we talk about coverage, we talk about two things: stated coverage and exclusionary coverage.

Stated coverage refers to a policy where the covered items are explicitly listed in the contract. If it is not stated as “included” then it is not covered.

Exclusionary coverage is broader, asking only what is excluded. If a part is not specifically listed as excluded, then the contract provider has to pay the claim for the part. This type of coverage is the best because it protects your vehicle in all but a small selection of circumstances.

With that said, stated coverage has its place. Although it provides reduced coverage options, certain stated coverage contracts can provide expansive coverage for the things that matter most. 

At Fair, for example, the Powertrain plan, the company’s most basic stated coverage option, protects the essentials: the engine, transmission, drive axle and transfer case. These are the sections that keep your vehicle moving. It does all of this with many of the perks of Premium coverage, such as Roadside Assistance, at a reduced cost.

Picking Your Plan

In this way, different plans work best for different people.

While Fair’s protection has names such as Powertrain, Standard, and Premium for its coverage tiers, different companies will have all kinds of different names, effectively producing the same sort of result: different levels of protection.

While the goal is the same, the potential outcome for the consumer can be very different. Finding the right contract is not easy, and spending time looking at the particulars can be overwhelming if you are trying to compare entire documents. As such, let’s focus on the essentials.

The first thing we will want to identify is the price and coverage term. A coverage term can be described in a couple of ways, typically as time (in years) and mileage (either added or total). 

Added mileage refers to mileage added to the odometer at the time of warranty purchase. Total mileage refers to the total mileage the vehicle can reach before the coverage has been used up. Two possible coverage plans are below:

Dave is buying a plan for a 2024 Ford F-150 with 2,000 miles on the odometer at the time of warranty purchase. He is looking at a plan of 10 years and 100,000 total miles. Alternatively, Jane is buying a plan for a 2019 Subaru Forester with 90,000 miles on the odometer at the time of warranty purchase: She is looking at a plan of 3 years and 30,000 additional miles.

 In the first example, Dave is purchasing an extended auto warranty that will be used up 10 years after the purchase date. However, if Dave hits an odometer reading of 100,000 miles before then, this will mean his coverage is used up.

Dave is covered for 10 years, or until his vehicle hits 100,000 total miles, whichever comes first.

Jane, by comparison, has a higher mileage car. She is going to buy her VSC for three years and 30,000 additional miles. Her odometer reads 90,000 miles at the time of purchase. That means that when her odometer hits 120,000 miles, or when she’s been driving under the policy for three years, her coverage will be used up. As with Dave’s policy, the plan will end when either limit is reached.

Once we know the length of coverage we are looking for, that’s when we want to start looking at price. Ideally, a consumer wants the most coverage for the lowest cost.

Comparing Coverage

In order to determine which contract has the most coverage, we need to look at 3 crucial sections. The first is the plan tier, where it describes the items included in the coverage. The second is the exclusions which reference that which is specifically not included in the coverage. Finally, we need to look at the liability limits that pertain to the contract itself.

In general, a liability limit, or limit of liability, is the section of the contract that places restrictions on your coverage. Ideally, the customer wants the least restrictive liability limit possible.

In certain cases, a contract provider will set a limit on what they are willing to pay out on a part of the vehicle. For example, a $3,000 liability limit on the engine would leave the customer still having to pay $2,000 on a $5,000 repair. This is not a good deal. Fair, by contrast, places its limit on the value of the vehicle. That means that regardless of the claim, so long as it comes under the NADA (National Automobile Dealers Association) value of the vehicle, your claim will be covered.

Other exceptions to liability are also worth noting. Restrictions on the number of claims you can make in a year, or perhaps a low restriction on the aggregate liability a provider is willing to assume. These can place the customer in a tough spot. 

Aggregate liability refers to the total amount that the warranty provider is willing to pay over the length of the coverage. A low aggregate liability will make it difficult for you to get all of the repairs you may need to be serviced, while a high aggregate liability will ensure that you’re protected.

With the basics sorted, it becomes a lot easier to look at some of the finer details of coverage. There is a thought that all providers offer roughly the same plans, but as we have already explored above, that is certainly not the case.

Although bigger ticket concepts such as price and liability, exclusions, and stated coverages are all great ways to differentiate between providers, understanding what a company values, the trust that they have built in the space, along with the perks associated with certain contracts can help push you in one direction or another. 

Perks Worth Watching

We have talked about one of these perks already: Roadside Assistance. Beyond Roadside Assistance, however, Fair’s perks include things like trip interruption coverage, rental car coverage, and a wide range of repair facilities that range from your local repair shop to the dealer.

• Trip Interruption Coverage provides the customer with $100 a day for up to 3 days to aid with expenses associated with breaking down over 150 miles from home.
• Rental Car Coverage provides $30 a day for up to five days for customers who need a rental, or Uber, while their car is being repaired.

Perks such as these aim to meet the customer where they are and provide the sort of service anyone might need in the event of a breakdown. This flexibility is essential to a contract and does not have to be limited to the perks themselves. Flexibility in membership can also provide a warry customer with the opportunity to exit their coverage.

Fair’s low-stress cancellation policy, along with its pro-rated refund policy, provides the customer the freedom to leave whenever they want. Additionally, Fair’s contracts are attached to the vehicle, meaning that they can be used to inflate the value of that vehicle when it is sold. All of Fair’s contracts can be transferred to a new owner just by calling the Fair team.

Who is the VSC for?

We’ve discussed coverage types, contract differences, and the various other qualities that make an extended auto warranty strong. To finish this dialogue, we will discuss the big one: who actually needs a vehicle service contract?

VSCs are targeted at individuals and organizations that seek to preserve their financial security. An unexpected, multi-thousand-dollar expense is typically too much for a person to shoulder without feeling the hurt. A VSC, paid monthly, spreads the expense of that risk out over the term of the coverage, whereas one paid in full, guarantees their financial risk at a fixed price.

It creates certainty in an uncertain future and guarantees the cost of certain repairs to never exceed the value of the customer’s initial payment.

New Owner

But is this really necessary for all consumers? If you just purchased a new vehicle, is there real value to buying an extended auto warranty when it is so unlikely that your car will break down? Why might a person buy an extended auto warranty for their vehicle when their car comes equipped with a factory warranty?

The answer to both questions relates to time. Although your car is new, it won’t be when the factory warranty runs out. When the factory warranty does run out, the cost of purchasing a VSC will surpass the cost of purchasing one at the time of vehicle purchase. As the vehicle will be older by that point, the pricing and coverage options available will be more expensive and limited. This is true, even when accounting for the years that the factory warranty overlaps with the vehicle service contract’s term. 

Current Owner

Similarly, a person who has owned their vehicle for some time may also benefit from buying a vehicle service contract. The product itself is designed to create stability and safety in an uncertain world. The purchase of a contract guarantees that the cost of certain repairs will never exceed the initial cost of the warranty, allowing the owner of the contract to better prepare for the financial future.

Making a Claim

Claims handling is arguably the least favorite part of anyone’s VSC journey. Having to run around to meet different expectations, all to get a claim covered can provide anxiety. Companies like Fair aim to eliminate the hassle by making claims processing easy. Fair’s two-step claims process begins when you breakdown. The customer simply logs into their easy-to-use dashboard, presses the Submit a claim button, and enters their favorite repair shop (including the dealer), and what they think has happened to their vehicle. 

After the customer drops the vehicle off at the repair shop, they are responsible for a $100 deductible. Meanwhile, Fair takes care of the rest. By working directly with the repair shop to complete the claim, the customer never has to worry about paying hundreds or thousands of dollars out of pocket for a covered claim. Instead, they can sit back, and wait for their car to be fixed while Fair handles everything else. 

In the event that a breakdown makes a car undrivable, the customer needs only to call Fair’s helpline, and select Roadside Assistance. Professionals will guide the customer through to the repair shop, ensuring that they are getting the help they need, every step of the way.  

Why Fair?

Vehicle service contracts only work when they actually provide coverage. The right provider is the one that places your needs first, and actually gives you the feeling of security a product such as this should provide. Fair’s superior value, personal customer service team, affordable pricing, and generous benefits are designed to make your life easier, so when the worst happens, you can feel protected. 

Learning more about your coverage options has never been easier. Go to fairwarranty.com/coverage today, to find the plan that is right for you.