Should I get a prepaid car maintenance plan?

Dealerships will offer prepaid car maintenance plans alongside other extras like extended warranties, credit insurance and anti-theft devices. They are not necessarily a bad deal. But the best way to decide if a prepaid maintenance plan is the right choice is to research expected maintenance costs — then compare these with the price you’re offered.

If you plan to add the prepaid maintenance plan to your auto loan, it may make more sense to instead keep a savings account for expected maintenance costs where you earn, rather than pay, interest.

What is a prepaid car maintenance plan?

Prepaid car maintenance plans are contracts that cover scheduled and expected maintenance. Unlike extended warranties, they only pay for preventative maintenance, like tire rotations and oil changes. The manufacturer warranty or extended warranty will still cover unexpected repairs.

A prepaid maintenance plan may enter the discussion when buying a new vehicle that doesn’t have scheduled car maintenance built into the retail price or when purchasing a used car that the manufacturer no longer covers.

Either way, be sure to ask whether the offered plan can be used at an independent mechanic’s shop or if it is limited to service at the dealership. Many such plans only allow service at the selling dealership, limiting your options for future maintenance.

Depending on the prepaid maintenance plan you are considering, maintenance may be limited to specific intervals (for instance, oil changes only being covered every 10,000 miles). Some prepaid plans only cover services once a calendar year or every six months, so depending on how much you drive, you may need additional paid maintenance on the vehicle.

Several manufacturers — such as Jaguar, Toyota, BMW, Volvo, MINI and Land Rover — offer prepaid maintenance plans. Some of these factory plans also include wear-and-tear items, such as windshield wiper blades and brake pads, but some don’t, so it’s critical to research before heading to the showroom.

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Are prepaid maintenance plans worth the cost?

As with most aspects of the car-buying process, doing the math before sitting down with the dealer is the key to saving money. Compare the price of the plan with the estimated cost of the scheduled or out-of-pocket costs during the covered period.

Your owner’s manual should list the maintenance you’ll need and when you’ll need it. Call the dealer service manager and ask for a breakdown of scheduled maintenance costs. You can also tally up costs yourself by considering the cost of maintenance, insurance, and other expenses.

If the estimated cost for scheduled maintenance of your new car for its first 30,000 miles is $400 and you pay $800 for the plan, a prepaid car maintenance plan is ultimately not worth it. If you pay $250 for the plan, you save money.

You can strike a balance but remember: If you include the prepaid maintenance plan as part of your loan, calculate how much you’ll pay in interest alongside the flat maintenance cost to get an idea of the full cost.

Pros and cons of prepaid car maintenance plans

Don’t just agree to a prepaid maintenance plan. Before you set foot in a dealership, know the expected maintenance costs for the vehicles you’re interested in. And keep these pros and cons in mind when you negotiate.

Pros

• Prices for covered services are locked in and not increased by inflation.

• You may be able to transfer the plan when you sell the vehicle.

• Residual value on leased vehicles may increase with a prepaid maintenance plan.

• Prepaid costs may be discounted compared to normal maintenance costs.

• Manufacturer-backed plans are generally covered by affiliated dealerships, regardless of location.

Cons

• Service intervals may not match those listed in the owner’s manual.

• Prepaid maintenance plans may cost more than the actual cost of maintenance.

• In many cases, you must get serviced at the dealership where you purchased the car.

• Common wear-and-tear items are generally not covered.

• May include coverage that is redundant or already included with an extended warranty.

The bottom line

Prepaid maintenance plans are negotiable — so don’t just agree to the price offered by the dealership’s finance office. If you know the potential cost of regular maintenance, you can plan ahead and avoid the stress of deciding when and where to take your vehicle.

However, it’s not the best choice if you already have a trusted mechanic or body shop or do not plan on staying in the area where you purchased the car. And if you wrap a prepaid maintenance plan into your auto loan, you could pay more in interest than the maintenance is worth. Be mindful of your loan’s interest rate, and don’t hesitate to negotiate the car’s overall price.

To determine whether a prepaid maintenance plan will benefit you, take the time to research expected costs and compare it to what the dealership offers.