There is a big difference between warranties and service contracts. A warranty
promises to perform needed repairs on the vehicle and that it be free
of defects. A service contract offers no promise of quality.
After a reasonable number of failed attempts to repair a vehicle under
warranty, you should have the right to a refund or replacement (lemon law). However, you could theoretically have over one hundred failed attempts
to repair the same major defect under a service contract, yet still have
no right to a refund or replacement.
The price of a service contract is typically based on several factors:
the make and model of the vehicle; whether the vehicle is new or used;
and the desired overage and length of the service contract. The cost can
range from several hundred dollars to over a thousand dollars or even more.
Some people will gladly pay for extra coverage for their vehicle, just
for the comfort of knowing that defects will be taken care of no matter
what happens, after the manufacturer’s warranty expires. For people
who keep a close eye on their budgets, service contracts make sense if
they plan to put a lot of miles on their vehicles in a short period of
time. In such cases the original warranty will expire much sooner, so
a service contract could be worth its weight in gold. Otherwise the manufacturer’s
basic warranties are usually adequate.