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Guide to Prepaid Car Maintenance Plans

What Is a Prepaid Car Maintenance Plan?
Austin Kilham
Austin KilhamUpdated April 9, 2023
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When you buy a car, the dealer may offer you a prepaid maintenance plan to cover maintenance costs for the vehicle. This is just one of a number of additional services you may be asked about, including extended warranties and paint protection. Is prepaid maintenance worth it? Before purchasing a prepaid car maintenance plan, it’s smart to do some research to find out if it makes sense for you. Here’s how these plans work, plus their pros and cons, so you can make the best choice.

What Is a Prepaid Car Maintenance Plan?

A prepaid car maintenance plan covers scheduled services your car needs. It typically includes things like filter changes, oil changes, tire rotations, and fluid replacement for your radiator, brakes, and power steering. This kind of regular prevention could help keep your vehicle in good working order and potentially increase the value of your car. However, a prepaid service plan might have some limitations. For instance, it might offer numerous tire inspections, but exclude the replacement of worn parts such as brake pads. A prepaid maintenance plan also doesn’t cover repairs for malfunctioning or broken parts. These are separate issues that may be covered under an extended warranty on a car. Recommended: 9 Tips on How to Shop for Auto Loans

How Does a Prepaid Car Maintenance Plan Work? 

Prepaid maintenance may be a way to lock in the price of maintenance for a certain amount of time or specific mileage which could help car owners avoid potential price increases in the future. The dealership will typically schedule the appointments for you and send reminders, so you don’t have to worry about keeping track of your car’s upkeep. However, when you buy a prepaid maintenance plan from a dealership, you’re usually locked into maintenance with the dealership’s service department. That could be a problem if you move. In addition, the plan might have a different schedule for performing maintenance services than the car manufacturer recommends. It may limit how frequently you can get an oil change, for instance. Finally, the cost of a prepaid maintenance plan is typically bundled into your monthly auto loan payments. That means you’ll be paying car loan interest on it.  

Is a Prepaid Maintenance Plan Worth It?

Car ownership attitudes differ. For some people, prepaid maintenance could be worth it. Since dealerships depend on a steady stream of customers coming in to have work done on their cars, they might try to get you to purchase a prepaid plan by offering a discount on it. Not only that, doing regularly scheduled maintenance may help keep your car running smoothly. This is something to keep in mind as you’re calculating car depreciation.  However, the best way to determine whether a prepaid plan makes financial sense is by doing research on the cost of maintenance services your car needs. Start by consulting your owner’s manual, which will list the regularly scheduled maintenance you need to have done on the car. Then, look up how much you might expect to pay for these services using online resources, such as Kelley Blue Book. You might also want to reach out directly to the service department of your dealership. Ask them for the prices of the required maintenance services for your car. For instance, if you need luxury car maintenance, you’ll want to know what those specific costs are. Compare the prices they quote you to the prices listed in the prepaid plan. Be sure to factor in interest payments, if applicable. If the cost of the prepaid maintenance is higher than the price of having your car serviced on your own, the prepaid plan isn’t worth it. One of the tips to save money on a car is to try to negotiate a lower price for the prepaid plan from the dealer. If they won’t lower the cost, you may want to skip it.

Can You Cancel a Prepaid Maintenance Plan?

You may be able to cancel a prepaid maintenance plan. It depends on the terms offered by your dealer. In general, you should have the option to cancel the plan within the first 30 days, as long as you haven’t had any maintenance work done.   If you have had servicing done, you may not be able to cancel the plan, or you might have to pay penalties or fees. Find out the terms of cancellation before you sign up for a prepaid service plan. Recommended: How Do Auto Loans Work?

Pros and Cons of Prepaid Maintenance Plans

In addition to costs and whether you can cancel your plan, there are a number of factors you should weigh to decide is prepaid maintenance worth it. On the plus side, prepaid maintenance plans are predictable. You know what you’ll pay for maintenance over a set period of time, making it easier to budget for. And you may be able to get a discount from the dealership if you sign up for a plan. On the downside, prepaid plans can be inflexible. For instance, you might be locked into receiving services from your dealership. What’s more, the maintenance schedule offered on the plan may not be as frequent as the one recommended by the car’s manufacturer. And the services on the plan may cost more than they would if you paid for them out of pocket.Finally, it’s worth noting that new cars don’t require that much maintenance these days. So prepaid maintenance might not make as much sense as it used to. Here’s a side-by-side comparison of the pros and cons of a prepaid maintenance plan.
ProsCons
Prepaid plans are predictable and easy to budget for.Prepaid plans are often inflexible, locking you into working with one dealership.
You lock in the amount you pay for maintenance, so you don’t need to worry about price increases in the future. Dealer’s maintenance schedule may differ from the manufacturer’s recommended schedule.
You may be able to get a dealership discount on a prepaid plan.Services on prepaid plans may cost more than they would if you paid for them separately.

The Takeaway

Do your research to decide if a prepaid car maintenance plan is worth it for you. If you can get the plan at a discount from the dealership, it may be. Just remember that if you opt for one of these plans, it will usually be added to your auto loan payments, so you’ll end up paying interest on it. Make sure the money you save with the plan is more than the money you spend on it.

3 Auto Loan Refinance Tips

  1. Refinancing your auto loan could lead to lower monthly car payments and more money in your budget. Lantern by SoFi can help you find the right auto refi loan for you.
  2. Shortening the term of your auto loan may increase your monthly payments, but you’ll likely pay less in interest over the life of the loan.
  3. Generally, the newer your car, the lower the refi interest rate. This is because younger cars typically have a higher value than old or used cars — and the car serves as collateral for the loan.

Frequently Asked Questions

What is prepaid maintenance on a car?
Can you cancel prepaid maintenance?
What’s included in prepaid car maintenance?
Photo credit: iStock/Kiwis
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About the Author

Austin Kilham

Austin Kilham

Austin Kilham is a writer and journalist based in Los Angeles. He focuses on personal finance, retirement, business, and health care with an eye toward helping others understand complex topics.
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