Mama Bear Blog

Should I buy a Vehicle Service Contract (aka Extended Warranty)?

Blog Post by Sonia Steinway - 10/7/17

Do I really need a Vehicle Service Contract (aka “extended warranty”)?

Our bottom-line: Vehicle Service Contracts (VSCs), sometimes incorrectly referred to as extended warranties, can be worthwhile, if you know what you’re buying and you get one at the right price.

Manufacturer warranties usually offer limited protection for 3 years or 36,000 miles. But cars are staying on the road longer than ever – the average is over 11 years old. And the average buyer expects to own their car for over 7 years.

Expected Ownership Period (In Years)

Transaction Type Mean Median
New 8.6 9.0
Used (dealer) 8.3 8.0
Used (private) 5.7 5.0
Leased 4.0 3.0

Buying a car is just the beginning: we own our cars for years.

So how does a vehicle service contract help?

VSCs eliminate two big risks:

First, the risk of costly surprises. A 2017 AAA survey found that 64 million Americans can’t afford an unexpected repair bill of $600 without going into debt. Meanwhile, a new transmission can run up to $2,500. With a vehicle service contract, that cost is taken care of.

Second, the risk of not being an auto repair expert. As more technology goes into our cars, fewer of us can fix them ourselves. We don’t know how much something should cost to repair, or if it needs to be repaired at all.

The right Vehicle Service Contract levels the playing field. VSC companies are experts, so we can leave the details, negotiations, and payments to them.

With the right Vehicle Service Contract, you choose where you repair

Another important benefit of Vehicle Service Contracts? The right VSC will let you choose where to repair your car. There are ~1,500 reputable, qualified auto repair shops in the U.S., but VSCs bought at the dealership will often steer you to repair at that dealership only.

So for the inevitable repairs – the noise won’t stop, the car won’t start – a VSC bought from ‘outside’ the dealership can be a great idea. If you buy a high-quality plan at a fair price, you can plan ahead – and pay ahead – for repairs, and repair where you choose.

So why don’t more people buy Vehicle Service Contracts?

Most VSCs were sold the wrong way: in the dealership’s back office, at inflated prices.

That’s why the first question you usually hear is:
Are vehicle service contracts worth it?
— or even worse —
Are “extended warranties” a scam?

A matter of trust.

Only 9% of us have a high level of trust in car salespeople. Maybe that’s why so many of us would never buy any extras from the dealership.

VSCs are great products, trapped in a bad reputation, for good reason.

Vehicle Service Contracts are worth it – if you buy them right.

At Outside Financial, we offer a better way to buy a VSC.

We vet VSC providers carefully, and only offer products we’d buy ourselves.

‘Go Outside’ for a Better Car Loan, and a Smarter Way to Own.


To learn more about VSCs, visit our VSC page.