Pros and Cons of Pre-Paid Car Maintenance Plans Car Maintenance Plansxplained NADAguides

June 18, 2018 No Comments

by Jeff Youngs

Pros and Cons of Pre-Paid Car Maintenance Plans  Car Maintenance Plansxplained  NADAguides

One of the biggest pain points of car ownership is the cost of vehicle maintenance. Whether you buy a New or used vehicle, from the date of purchase you’re always rolling towards the next service date and the expense associated with that service. Car dealerships have recognized this pain point and have responded by offering what are referred to as “prepaid car maintenance plans”.

Unlike a vehicle warranty which covers the repair and replacement of defective vehicle components, a car maintenance plan covers the cost of regularly scheduled maintenance as outlined in the ownership manual – think oil changes, replacement filters, tire rotation etc..

While vehicle maintenance is part of the cost of ownership for consumers, it is a revenue stream for car dealerships and their service centers. Likewise, prepaid maintenance plans are seen as revenue generators for dealerships. Under the right circumstances, they can still offer value to consumers, but it’s important to know what to look for and what to consider. In order to avoid taking a bad deal, if a dealership offers you a prepaid maintenance plan, make sure you look at all the details.

To help you know what to look for and consider, check out the following possible advantages and disadvantages to prepaid maintenance plans.

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The Good

Predictability

A maintenance plan locks in the cost of your scheduled services for a set period of years or miles from the date of purchase. This offers you predictability and an eased financial burden down the road. You won’t be subjected to price increases in the years ahead and as routine service is already paid for, you won’t delay necessary maintenance due to financial constraints. Oil changes, tire rotations and more will be as easy as setting an appointment and bringing your car to the dealership.

Discounts

The biggest revenue generator for most dealerships (yes, often bigger than the car sales themselves) is the service department. Selling a prepaid maintenance plan gives the dealership the steady stream of customers they depend on. Because dealerships so heavily depend on their service departments for revenue, they will usually offer discounts on service when you purchase a prepaid maintenance plan.

The Bad

No Options

If you purchase a prepaid maintenance plan, you will only be able to have your car serviced at the dealership you bought the plan from. This means that if you move at some point while your prepaid maintenance plan is still in effect, you will no longer be able to take advantage of the plan.

Sometimes customers have a bad experience with a service center. If this happens during your prepaid plan, you may wish to no longer take your vehicle to that specific dealer’s service center. With an already paid for maintenance plan you will face a decision between foregoing services already paid for and taking your vehicle to a service center you may not be happy with.

Vehicles Are Durable

Most of today’s vehicles require very little maintenance. It’s even common to be able to go 5,000 or more miles between oil changes. Whereas not too long ago, most manufacturers required an oil change every 3,000 miles. Aside from these periodic oil changes and a tire rotation every now and then, your vehicle will likely only need significant service at 30,000 mile intervals.

On top of the infrequent maintenance requirements for modern day vehicles, most prepaid maintenance plans do not cover wear and tear items like tires, windshield wipers, or even brake pads. As an example, if the prepaid maintenance plan being offered by the dealership is for 3 years or 36,000 miles, it’s likely that only the 30,000 mile service, as recommended by the manufacturer, will amount to a relatively expensive price above $150.

Non-Manufacturer Maintenance Schedule

The prepaid maintenance plan offered by a dealership may follow a different schedule than the one recommended by the Vehicle manufacturer. If you are driving in harsh conditions, say extreme heat/cold or frequent stop and go traffic, the manufacturer may recommend oil changes every 4,000 miles. However, the maintenance plan offered by the dealership may not account for these variable driving conditions and may only allow oil changes every 7,500 miles.

This same discrepancy can occur across many maintenance items. It’s important to review both your manufacturer’s recommendations and the dealership’s maintenance plan offer before making a purchase decision.

Final Decision

When deciding if the prepaid maintenance plan being offered by your dealer is worth it to you, the biggest factor will likely be: “What do you get for what you pay?” If the maintenance plan covers 3 years or 36,000 miles and the manufacturer only recommends a few oil changes plus a 30,000 mile service, for most vehicles anything over $500 may not be a good deal (some premium vehicles may be an exception to this). If the price is below that, you may want to consider the plan. Make sure you price out all service items and verify what is covered and what is not before making your final decision.

Convenience and the chance to save money will play a big role in your final decision. You’ll want to weigh the discounts and convenience offered through a prepaid maintenance plan against the average cost of service, recommended service intervals, and the long-term maintenance commitment being made by prepaying for services.

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