There are only two types of VSCs... "Exclusionary" and "Named Component". Exclusionary is typically for a new car or a car that qualifies as new and has relatively low mileage. That covers everything the factory covers excluding a small list of parts that are wearable items i.e. belts, hoses, and bulbs. Named Component coverage is a used car warranty that is over a designated mileage disqualifying it for new car coverage. This VSC is a tiered coverage ranging from Bronze, Gold, and Platinum coverage. Each tier covers more from Bronze to Platinum. The VSC you'll want is one that has "Add-On Years/Mileage". So, if you purchase a 5 Year/ 75k VSC with Add-On Years and Miles, you'll have a warranty that covers 8 Years and 111k from the time of purchase. At the end of your 3/36, you'll still have 5 Years and 75k left. You'll never use your warranty until the factory coverage expires. These warranties only come into play on the backside of your factory warranty once it terms out.
Every dealer won't offer the same VSC. What a dealer offers is based on what their third-party VSC provider is selling to them. Most people don't know what to look for, and finance can drop the ball and not explain what you're getting, so you buy what's offered thinking that you have good coverage for a good term. The retail cost to you from the dealer is grossly overpriced considering the dealer cost from their third-party provider. VSC programs are the highest grossing profit program in the Finance dept., so they try very hard to retain that sale.
There is something very important to understand when buying aftermarket products from a dealership. A Dealer's motivation to sell aftermarket is less about your satisfaction and protection, and more about his/her reinsurance opportunities. A Dealer takes a portion, usually around 20 to 25%, of every aftermarket sale and reinsures those profits in an offshore account (outside the US). So, if that sale included a term warranty, then the Dealer reinsures that warranty offshore where he/she is taxed at a lower rate than the US would tax them. Once the warranty terms out (matures), the Dealer can take their money back into the US where they only pay capital gains. The offshore accounts are typically based out of the Turks & Caicos, or somewhere in the Caribbean. This is all legal, although the IRS is always trying to find ways to make these transactions illegal. A reinsurance program is an extremely important part of a Dealer's operations due to the amount of money a Dealer can bank over the years... millions. Again, this is not illegal, but a Dealer's motivation to sell aftermarket products is rooted in profit more than customer satisfaction. I would always buy fewer things aftermarket from a Dealer because you'll always overpay.
It's very important to know what you're purchasing and ask the right questions, or you'll be unpleasantly surprised as you were after the fact. Sometimes a VSC pays off, as yours may have. Most of the time they are worthless. Financing a VSC is the worst thing you can do. You're better off just putting that payment into a rainy day fund for your car. The only time a VSC pays off is when your cost of repairs exceeds the retail cost you paid for said VSC. You need to compound your interest over the term of your car note to see exactly how much your retail cost of said VSC costs you. You're always better off just paying for the VSC outside of the car note so you're not paying interest by financing it.
* I say all of this with accuracy because I've worked in the Dealer business for over 30 years. I am retired now. I don't have a grudge toward the automotive industry, but this industry has gotten a bad reputation for some obvious reasons, and some not so obvious. There are many great Dealers out there, and I have worked with some on a national level, but they all have reinsurance programs and are motivated to sell as many aftermarket items to bank those profits. Today's market is squeezing the Dealer out. Considering the manufacturer's cost and the Bank's rate to the Dealer, a Dealer makes very little gross on the sale of a car. This is why there are so many profit programs that a Dealer offers to enhance gross on the sale. None of it is illegal, but many finance all this and go into unnecessary debt. Reinsurance programs are another way the Dealer can secure more profit and they all have them.
