Should You Buy Prepaid Maintenance?

How Does Prepaid Maintenance Work?

Prepaid maintenance plans are a dealer-added service that includes the cost of regular trips to the service center. Programs like this and other services such as GAP insurance and extended warranties are typically offered to you by the Finance and Insurance Manager, toward the end of your loan process, before you sign the final paperwork.

These programs offer regularly scheduled maintenance such as oil changes and tire rotation, on a prepaid plan basis. Your maintenance will then be included in the cost of your loan, and you won't have to worry about paying for services out of pocket when you get them done at the dealership you purchased from.

When prepaid maintenance services are rolled into the cost of your loan, and you have them on a use it or lose it basis. For example, if your service includes an oil change every six months, and you don't go, you're paying for a service you didn't get. Or, if you're not in the area of your approved service center when you need an oil change, you may be forced to pay someone else to do it anyway.

Of course, plans and coverage differ depending on who is backing it. Plans offered by your dealership tend to be more rigid, only allowing for service at a specific dealership or dealer group. Plans offered by the manufacturer may be more versatile, allowing you to get serviced at any franchised dealership across the country.

A downside of prepaid maintenance is that the cost is rolled into your loan meaning it brings up your monthly payment amount and increases the overall amount of your loan. This could equal way more than you bargained for in interest charges, especially if you're a bad credit borrower who qualifies for higher interest rates.

Is Prepaid Maintenance A Good Idea?

Prepaid Maintenance can be a good idea for some borrowers. If you're not the type to remember what you need to do with your car or aren't one to keep a good schedule, having the scheduled service built into your loan could help you remember to regularly service your car.

On the other hand, the price of the prepaid plans can get expensive when you factor in the extra interest charges you're paying. In this case, paying for your maintenance out of pocket as the need arises makes more sense, especially if you have a high interest rate.

If you're looking for extra peace of mind, know that a prepaid maintenance program isn't the same as an extended warranty which could repair unexpected issues. Prepaid maintenance is only for basic services like oil changes, fluid top-offs, and tire rotations. All the things that are normally done at the same time, and don't cover anything extra that you may need.