Assuming that you’re asking about an extended service contract rather than an agreement that covers routine maintenance, this would be a contract that provides specific repairs and other benefits for mechanical problems that are not covered by a vehicle’s warranty. You pay X amount of dollars for the contract, and an insurance company agrees to cover certain repairs over a specified number of miles and time period.
Such agreements are sold under various names, including extended warranties, vehicle service agreements, mechanical breakdown insurance and others. Their cost and what they cover can vary widely (they are available on new and used vehicles), plus we don’t know your driving regimen, so we cannot say whether it is a good idea to buy one.
However, they usually provide little or no benefit while factory warranties remain in effect, and the prices are generally negotiable. You can learn more about this in the Cars.com Advice section in our discussion of what to expect in the finance and insurance stage of buying a vehicle, here.
Moreover, a Consumer Reports survey published a few years ago found that most vehicle owners spent more on extended service contracts than they received in benefits. Vehicles have become more reliable, and many come with 100,000-mile powertrain warranties (GM, Chrysler, Hyundai and Kia, for example), so we suggest you think carefully before you plunk down $1,000 or more for an extended contract.
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