What’s the Difference Between a Vehicle Service Contract and Mechanical Breakdown Insurance?
Understanding Your Options for Vehicle Repair Coverage
When it comes to protecting yourself from expensive car repairs, you may have come across two options: Vehicle Service Contracts (VSCs) and Mechanical Breakdown Insurance (MBI). While they both help cover repair costs, they operate differently and cater to different types of drivers.
Choosing the right option can save you money and frustration down the road. Let’s break down the key differences between VSCs and MBIs so you can determine which one is best for you.
What is a Vehicle Service Contract (VSC)?
A Vehicle Service Contract (VSC) is a protection plan that helps cover the cost of repairs after your manufacturer’s warranty expires. It is not insurance but rather a contract that helps pay for covered mechanical and electrical failures.
How a VSC Works:
- If your car experiences a covered breakdown, take it to a licensed repair shop.
- Pay your deductible (if applicable).
- The VSC provider covers the rest, helping reduce your out-of-pocket expenses.
VSCs are typically purchased through dealerships or third-party providers and offer different levels of coverage based on your needs.
VSCs are also regulated by consumer protection laws, meaning providers must follow strict guidelines regarding transparency, cancellation policies, and claims processing—helping ensure customers receive fair treatment.
What is Mechanical Breakdown Insurance (MBI)?
Mechanical Breakdown Insurance (MBI) is a form of car insurance that covers repair costs related to mechanical failures. Unlike a VSC, MBI is regulated by state insurance laws and provided by insurance companies rather than dealerships or warranty providers.
How MBI Works:
- If your car needs repairs for a covered mechanical failure, take it to a licensed repair shop.
- File a claim with your insurance provider.
- Pay your deductible, and your insurance company covers the rest.
MBI policies must be purchased through an insurance provider, and coverage is often limited to newer vehicles.
Key Differences: VSC vs. MBI
| Feature | Vehicle Service Contract (VSC) | Mechanical Breakdown Insurance (MBI) |
|---|---|---|
| Provider | Dealerships & third-party companies | Insurance companies |
| Regulation | Protected by consumer protection laws | State insurance regulations |
| Coverage Start | Can be purchased at any time (as long as the vehicle qualifies) | Usually limited to new vehicles |
| Claims Process | Handled by VSC provider, repairs paid directly to the shop | Filed with an insurance company, reimbursement process may apply |
| Payment Structure | Upfront or monthly payments | Paid as part of your insurance premium |
| Deductibles | May apply, varies by provider | Usually a set amount per claim |
| Transferability | Often transferable to a new owner | Usually non-transferable |
| Cost | Typically more affordable and flexible | Generally more expensive and bundled into insurance premiums |
Pros and Cons of Each Option
Vehicle Service Contract (VSC)
✅ Pros:
- Can be purchased for both new and used cars.
- Typically more affordable than MBI, with flexible payment options.
- Offers comprehensive coverage options (powertrain, bumper-to-bumper, etc.).
- Repairs are often paid directly to the repair shop, reducing upfront costs.
- Can be purchased anytime, even after factory warranties expire.
- Regulated by consumer protection laws, ensuring fair treatment for customers.
- Often transferable, which can increase resale value.
❌ Cons:
- May require an upfront payment or monthly contract.
- Coverage varies by provider—some contracts may have exclusions.
Mechanical Breakdown Insurance (MBI)
✅ Pros:
- Offered through insurance providers, making it a familiar option.
- May be bundled into your auto insurance payments for convenience.
❌ Cons:
- More expensive than a VSC in most cases.
- Coverage is usually limited to new vehicles and may not be available for used cars.
- Claims may require reimbursement, meaning you may have to pay upfront for repairs.
- Not transferable when selling your car.
- Strict eligibility requirements—often only available for vehicles under a certain age or mileage limit.
Which Option is Right for You?
The best choice depends on your vehicle, budget, and coverage needs:
- Choose a VSC if you own a used vehicle, want flexible coverage, and prefer direct repair payments without dealing with insurance claims.
- Choose MBI if you are insuring a newer car and prefer to bundle repair coverage into your insurance plan—understanding that it may cost more.
Why Cuvrd is the Smarter Choice for a VSC
At Cuvrd, we believe in providing transparent, hassle-free protection for your vehicle. Unlike traditional VSC providers that rely on outdated sales tactics, we use technology to provide you with the best coverage at the best price—directly through dealerships.
Here’s why drivers prefer Cuvrd’s VSCs:
- No pushy sales tactics – You get clear pricing with no pressure.
- Straightforward coverage – Easy-to-understand contracts with real protection.
- No unnecessary middlemen – We cut out extra costs to keep prices fair and affordable.
- Consumer-friendly policies – Our plans comply with consumer protection laws, ensuring fair pricing, transparent contracts, and easy cancellation policies.
- A seamless digital experience – Managing your plan and claims should be simple—and with Cuvrd’s platform, it is.
Whether you’re looking for long-term vehicle protection or simply peace of mind, Cuvrd’s VSCs offer a smart, stress-free way to keep your car covered.