What Is the Difference Between a Limited Warranty and a VSC?

Brand-new cars and limited warranties almost always go together. Whenever someone purchases a brand-new automobile, it always comes with a limited warranty. If you buy a pre-owned vehicle, the limited warranty will be transferred to you, the new owner. However, you can give your customer the opportunity to also buy a vehicle service contract. But you have to make sure you can answer clearly when your client asks, what's the difference between a limited warranty and VSC?

Knowing the difference between a limited warranty and VSC can help you create an enticing offer that your clients can’t help but say, “yes.”

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So… What is a Vehicle Service Contract?

First, it's important to note that vehicle service contracts are also known as extended warranties or auto service contracts. Don't be confused by these interchangeable terms. Got it? Good.

VSCs are additional services that consumers can purchase to protect against the financial burden of costly vehicle repairs. But it only takes effect after the manufacturer warranty has expired.

A vehicle service contract can cover both new and used cars. But the older the car gets, the more likely it is to need repairs.

To be crystal clear.

A vehicle service contract is the same as an extended warranty and auto service contract.

While limited warranty and VSC are different.

What does a vehicle service contract cover?

The vehicle service contracts cover components prone to failure after the warranty has expired. Significant parts of the car, like the engine, transmission, and air conditioning, can be substituted for repairs. Roadside assistance and rental car reimbursement may also be covered.

Coverage is different with each warranty provider and contract. So make sure you read the policy before you sign up.

What may not be included?

The service contract may not cover repairs to brakes, clutches, and other standard parts that should be fixed during regular car maintenance. (Those are considered “wear” items)

Generally, suppose your vehicle service contract didn't have a vehicle component in the list of being covered. In that case, you can safely assume that the warranty doesn't have coverage for it.

The most significant advantage of purchasing a vehicle service contract is the savings made on unplanned repairs for a car without a manufacturer's guarantee.

Table for the Difference Between a Limited Warranty and a VSC

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The standard limited warranty on new vehicles is 3 years or 36,000 miles Bumper to Bumper coverage (everything but wear items) and 5 years or 60,000 miles on the powertrain (all the components that “move” the vehicle like engine transmission and drivetrain). The warranty period begins at the original ISD or In-Service date - the date when the vehicle was originally registered to the first owner.

Warranty duration and mileages can differ by the manufacturer but coverages remain similar.

Is VSC a good add-on for consumers?

Once the limited warranty expires, the VSC will immediately take over. This contract is handy and can help car owners save hundreds or even thousands of dollars - especially for the long term. So offering a VSC is a smart move. But if they don’t want to buy a VSC at the moment you can also tell them that a VSC can be purchased at a later date. Just save their contacts and follow up with them sparingly.

Vehicle service contracts can be more advantageous in these areas:

When selling older vehicles

VSC comes from a reputable warranty provider

Or if your client simply wants peace of mind.

But the most significant selling point of purchasing a vehicle service contract is the savings made on unplanned repairs for a car without a manufacturing guarantee (or expired guarantee). Say your client bought a used car, and the limited warranty expired without him realizing it. Then the cylinder block broke and needed a costly repair. Your client will be in expensive trouble and will likely not be happy about it.

Where Can You Buy Vehicle Service Contracts?

There are three main channels where you can buy a VSC.

1. From the Manufacturer.

The good thing about getting your VSC from the manufacturer is that you'll always receive genuine replacement parts when repairs are covered. The not-so-good thing about getting your VSC from the manufacturer is that it's a bit more expensive than the other choices. Furthermore, you'll be limited to having your car serviced at one of the manufacturer's authorized service centers.

2. Independent 3rd Party Companies

This is a cheaper alternative for getting a VSC from manufacturers. And you'll also have more flexibility when it comes to repairs. However, it would be best if you did a little digging to ensure that this independent 3rd party company is trustworthy. (and see how their business is going)

3. Partnered 3rd Party Companies

Most car manufacturers work with a reputable third-party provider (typically a well-known and credible company). These offer customers trustworthy and more reliable services than an independent third-party provider would.

Here's what you can do to ensure that the VSC provider is legitimate.

In some states, the service contract must be backed by an insurance company.
If an insurance company backs the auto service contract, check with the state insurance commission to ensure the company is still in business.
Also, check with the insurance commission to see if any problems have been reported about the company.

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The Bottom Line...

Limited warranty and VSC are helpful for car owners when given the right coverages. If you explain well to your customers the money they’ll potentially save, and the benefits of having a VSC, then it’s a sure deal.

Bookmark this blog so that the next time someone asks you for more details about a limited warranty and VSC, you'd know exactly what to tell them.

Do you have questions? Don't hesitate to contact us, we'd love to answer your queries!

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