Quick answer: Mechanical breakdown insurance (MBI) is usually the cheaper and more regulated option, often around $100–$300 per year plus a deductible, but you can usually only buy it for new or nearly new cars from your car insurer. An extended warranty (vehicle service contract) costs more, typically $1,500–$4,000 for several years, but is available for older and higher-mileage cars.
MBI vs extended warranty at a glance
| Feature | Mechanical breakdown insurance | Extended warranty (service contract) |
|---|---|---|
| Sold by | Car insurance companies | Automakers, dealers and third-party companies |
| Regulated as | Insurance (state insurance departments) | Service contract (varies by state) |
| Typical cost | About $100 – $300 per year (varies widely) | $1,500 – $4,000 total, or $80 – $150 per month |
| Deductible | Often $100 – $250 per claim | $0 – $250 per visit |
| Eligibility | Usually new cars, low mileage (for example under 15 months and 15,000 miles at some insurers) | Older and high-mileage cars often accepted |
| Coverage length | Renewable, often up to about 7 years / 100,000 miles | Fixed term, for example 3–7 years |
| Shop choice | Usually any licensed shop | Depends on contract |
| Cancel anytime | Generally yes, with your insurance policy | Usually, with a pro-rated refund |
Who sells mechanical breakdown insurance?
Only some insurers offer MBI, and availability varies by state. For example, GEICO has offered MBI for cars under 15 months old with less than 15,000 miles, renewable up to 7 years or 100,000 miles. Some other insurers sell repair coverage through partners, which may be a service contract rather than insurance. Ask your insurer exactly what type of product it is.
What both usually cover
- Engine and transmission components
- Drive axles and differentials
- Steering and suspension parts
- Electrical components and AC (on comprehensive plans)
What neither covers
- Maintenance (oil changes, filters, alignments)
- Wear items (brake pads, tires, wiper blades, clutches on most plans)
- Damage from accidents or neglect
- Pre-existing problems
Which one should you choose?
- New car, insurer offers MBI: MBI is often the best value.
- Car still under factory warranty, no MBI available: consider the automaker’s own extended plan before the factory warranty ends.
- Older or high-mileage car: an extended warranty may be the only option. Read Is an Extended Car Warranty Worth It? and compare providers in Best Extended Car Warranty Companies Compared.
- Reliable car and some savings: you may be better off with neither and a dedicated repair fund.
Frequently asked questions
Is MBI the same as gap insurance?
No. Gap insurance covers the difference between your loan balance and the car’s value after a total loss. MBI covers mechanical failures.
Does regular car insurance cover breakdowns?
No; see Does Car Insurance Cover Mechanical Breakdown?
Sources
- Bankrate: Mechanical breakdown insurance
- Federal Trade Commission: Auto Warranties and Auto Service Contracts