What is the Difference Between a Car Warranty and a Service Contract?

Whenever you buy a vehicle, the two terms you hear repeatedly are ‘car warranty’ and ‘auto service contract.’ Both these phrases are also familiar outside the automotive domain. For example, while purchasing any electronic device or appliance, we come across these. However, we find a fair amount of confusion between these terms, and it is why we decided to explain each in detail. First thing first, why do we need a car warranty?
Well, whenever we buy a car, we want it to last for a long time. Automakers know the consumer’s expectations very well. They employ quality components and follow rigorous manufacturing processes. Still, cars break down for various reasons, and manufacturers understand it completely. Therefore, developers and dealers offer a car warranty and service contracts along with the purchase.

Car Warranties
If your vehicle shows any wear and tear or breakdown issue, the warranty allows you to receive service on your vehicle for little to no cost to you. Warranties vary by each automaker and dealer, so you should familiarize yourself with what comes under yours when you purchase a vehicle. Understand very well that you become responsible for making all repairs and replacements when the warranty period is over. It could cost you a lot, primarily if problems are related to the engine, suspension, and other crucial vehicle parts.

Warranty language, like 1 month or 1,000 miles, implies that the warranty is valid only for the first month or 1,000 miles, whichever comes first.
While all manufacturers offer a warranty on new cars, a used car may or may not possess it. For instance, if you buy a car privately, you can only enjoy the warranty if it comes with it. If not, you have to pay for diagnostics, repairs, and replacement whenever such a situation arises.

On the other hand, purchasing a vehicle from a dealer may come with some kind of warranty. It could be an extended warranty or service contract, protecting you against unexpected repair expenses. People talk about the extended warranty or service contract interchangeably; however, both have subtle differences.

Extended Warranties
An automaker may offer an extended warranty on a new or certified pre-owned vehicle. The question is why a new car needs an extended warranty. For extra peace of mind for the buyer, the manufacturer is willing to protect the vehicle beyond its standard warranty.

In pre-owned cars the manufacturers sell, they offer extended warranty after thorough inspection and repairs. Certified pre-owned vehicles are mostly less than five years old or have less than 60K miles covered. Bear in mind; these vehicles could be leased or trade-ins. So, expect them to function a lot better than used cars you buy from a private seller.
The extended warranty on pre-owned vehicles doesn’t cost you anything. However, these vehicles are costlier than the ones available in the used car market. So, what is the validity of a typical extended warranty?

Well, a standard extended warranty is acceptable for seven years or 100,000 miles bumper-to-bumper, or two years or 24,000 miles. You may be wondering about the reason for this difference. It actually depends on how the manufacturer sees it. Some auto companies think of an extended warranty as part of an extension to the original warranty. Others count it from the day you buy the car. Bear in mind; every manufacturer covers different elements in their extended warranties. Therefore, anything not included in the warranty will require you to pay for its repairs and replacement.

Service Contracts
A vehicle service contract allows you to get free repairs for the components mentioned in the coverage. The contract works in various scenarios. For instance, it can complement the protection offered by your car warranty, adding the parts and systems not covered in the standard warranty. On the other hand, it can work as a full warranty after the original one expires.
Unlike a standard warranty, you have to pay for the service contract. However, it is available for a certain period or miles, the same as other warranties.
If you consider opting for a service contract for your used car, we advise you to shop around and get quotes for comparison. While doing this, avoid overlapping coverage and do not hesitate to ask for a discount.