rewrite this title Auto Warranty vs. Vehicle Service Contract (Extended Warranty) – NerdWallet

Car warranties can be confused with vehicle service contracts (VSCs), in part because a VSC is often called an extended warranty. Though they’re both called warranties, they provide different types of coverage from different sources.

It’s important to know the difference between a true car warranty and an “extended warranty,” because the two are regulated differently by the government. An extended warranty is actually classified as a type of insurance or service contract, not a warranty.

There are a few key factors that can help you determine whether your warranty is built-in or optional:

VSCs are meant to extend coverage after your factory warranty expires, so you don’t need both at the same time.

A new car factory warranty typically lasts 36,000 miles or three years, whichever comes first. Some cars also include “powertrain” warranties that cover components like the engine and transmission for longer periods of time, typically five to 10 years.

Whether or not you also need an “extended” warranty depends on your car’s condition and age:

To make things more confusing, some dealerships also offer “service contracts” that allow you to prepay for regular car maintenance tasks like oil changes and air-filter replacements.

These prepaid services are different from the mechanical issues that a VSC covers. They might include an oil change every 5,000 miles, for example, but won’t cover any breakdowns or replacement parts if something goes wrong.

In the car warranty industry, similar names can mean very different coverage. Always request a sample contract to make sure you know exactly what you’re getting. Dealerships might slip in a service contract to your purchase. Know that this is an optional add-on that you can opt out of.

Mechanical breakdown insurance (MBI) is sold by insurance companies like Geico and Progressive as an add-on to your car insurance. You usually have to sign up for MBI when your car is brand-new or close to brand-new.

To make things more complicated, California law doesn’t allow third-party companies to sell “extended warranties” (VSCs). In California, these products have to be sold as mechanical breakdown insurance, and sellers have to be licensed insurance providers.

Reddit is an online forum where users share their thoughts in “threads” on various topics. The popular site includes plenty of discussion on financial subjects like home improvement, so we sifted through Reddit forums to get a pulse check on how users feel about car warranties. People post anonymously, so we cannot confirm their individual experiences or circumstances.

One Reddit user clarifies that a true warranty is guaranteed by the carmaker, while a service contract is extra paid protection after that guarantee runs out. Users remind each other that the two can’t legally be sold as the same thing, and that it’s important to check the fine print to make sure you know what you’re getting. Some users believe that warranties are never worth the added cost if they’re not backed by the manufacturer.

About the author

Dalia Ramirez writes about home and car services for NerdWallet. She has previously written about estate planning, cryptocurrencies, small business software and other personal finance topics. Dalia has a B.A. in science and technology studies from Wesleyan University. Her work has appeared in publications including The Washington Post, the Los Angeles Times, Bloomberg and The Associated Press. She is based in San Francisco.