Should You Buy a Prepaid Car Maintenance Plan?

You're buying a car that has a great reputation for reliability, and it even comes with a strong warranty to offset the cost of unexpected repairs. But just before you sign the contract, the dealer offers you a prepaid maintenance plan. Whenever you need scheduled maintenance, just roll in, get it done and roll out without ever opening your wallet. The pitch sounds tempting. But is prepayment a smart use of your money?

Typically, a car manufacturer's prepaid maintenance plan covers only the regularly scheduled maintenance listed in the owner's manual and excludes coverage for anything that wears out, such as brake pads and rotors or windshield wipers. Some dealership maintenance plans may offer unlimited oil changes, which are useful, but may not include other maintenance items that need replacing.

If you want a prepaid maintenance plan, try to get one that's offered by the carmaker or a company it has approved and stands behind. Getting a prepaid plan that is only good at a single dealership limits your flexibility, making it the only place you can go for service. Carmaker maintenance plans typically are honored at any of the brand's franchised new-car dealership service departments.

Prepaid maintenance plans can be customized for as long as you intend to have the vehicle. General Motors brands (Buick, Cadillac, Chevrolet and GMC) offer plans that range from 24 months/30,000 miles to 180 months/150,000 miles. Yes, you could prepay for 15 years of maintenance if you really wanted to.

But, a prepaid maintenance plan is not the same thing as an extended warranty: Dealers will usually offer you one of these as well, and you can read more about the pros and cons in "5 Questions to Ask Before You Buy an Extended Warranty."

Are Prepaid Plans a Good Deal?

"In general, any product that a dealer offers has value if the customer needs it and the price is right," said Oren Weintraub, president of Authority Auto, a car-buying concierge company based in Los Angeles. But it's nearly impossible to know if the price is right as you sit in a dealership's finance and insurance office, signing lease or purchase paperwork, he said.

"You can't figure this out face to face, on the spot," Weintraub said. "People get hit with so much information, and they're unprepared. They have no idea of the price of the product." That's because the finance manager will likely present the prepaid maintenance plan in terms of a monthly payment, not the overall price tag for the plan.

The only way to get clarity, then, is to do some cost research before you buy the car, when there's no pressure and you have time to do some comparisons between the out-of-pocket and prepaid costs.

Contact the service department of a dealership that sells the vehicle brand in which you're interested, and ask to speak to the service manager or a service adviser. Be persistent: Not all service managers will be available on the spot, and some might not call you back. You might have to try a couple of different dealerships to get the information you need.

Ask for a list of all the required maintenance for the term you're interested in, along with the price of each service. And if you want to be sure the quotes only deal with the service that the manufacturer recommends (as opposed to the dealership service department's recommendations, which might include some items that are not required), you can usually download the vehicle owner's manual. It will list all the required services at the correct service intervals.

Armed with the out-of-pocket costs, you can negotiate a price for a prepaid plan. If you can't strike a deal that's less than what you'd pay out of pocket, it might not be worth doing. One pitch you'll get at dealerships is that prepaying locks in the costs and is a hedge against inflation. That may be true, but it's also true that you will pay interest on the plan if you wrap it into the financing for your vehicle purchase or lease.

Weintraub says that with the exception of just a few car brands whose plans don't offer good value (which he wouldn't name), he negotiates prepaid maintenance plans for his clients. "It's a no-brainer," he said.

A really good maintenance deal can be had if you're leasing, he said. Audi and Mercedes-Benz are two carmakers that incentivize the purchase of prepaid maintenance by increasing the residual value of the lease vehicle. Doing that reduces the upfront cost of the maintenance package.

Weintraub gave the example of a lease for a 2018 Audi Q5 with a residual value of 55 percent: The prepaid maintenance plan's retail cost is $869 for four years. If you were to fold the cost of the plan into your lease, Audi would raise the SUV's residual value by 1 percent, Weintraub said.

If the car's retail price was $50,000, that tweak adds $500 to its residual value, and the $869 maintenance plan would only cost you $369. Add tax and interest, and your cost for the plan is about $410, which buys you scheduled maintenance at 20,000, 30,000, 40,000 and 50,000 miles, plus brake fluid replacement every two years. Based on price quotes Weintraub got from two Southern California Audi dealerships, the out-of-pocket cost for those service visits come to about $1,910. You would save $1,500 by prepaying.

If you were to buy the Q5 at the end of the lease, you would not realize the savings due to its higher residual value. But most people don't buy out their leases, Weintraub said.

Should You Buy a Plan?

Whether you should buy a prepaid maintenance plan depends on several factors. Can you negotiate a better-than-retail price? Is the convenience of not paying as you go important to you? Will prepaying offer you peace of mind? Might it give you an incentive to keep your car maintained? After you consider those factors, you'll have a good sense of whether a prepaid maintenance plan is right for you.