Red Bull's 24-year-old German quipped after winning his second title in Japan on Sunday that, even if he was now the sport's youngest double champion, his great compatriot Schumacher was the youngest to win seven crowns.
Schumacher, now 42, briefly led Sunday's race for Mercedes and has a record 91 wins under his belt in a career that started in 1991.
No other driver has won more than five championships and only eight have taken more than two since 1950 but Vettel appears certain to join their number before long.
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"It is the best performance so far in Formula One, at his age to win two (titles)," Austrian Lauda said.
"To win the first one is always the most difficult because all your career, starting from go-karts all the way up, is years and years of work for this particular day. The second one is easier in a way because there is less pressure."
Asked whether he could win many more, the man who won championships with Ferrari in 1975 and 1977 and McLaren in 1984 nodded in agreement.
"He has all the circumstances to do it. If the car and his career and where he drives and which car continues in the right direction, then yes.
"If you choose the wrong car or the car you are driving doesn't work, then you can't win because its always the combination of the two," the 62-year-old added.
"But he certainly theoretically can win more than Schumacher if he sits at the right time in the right car because he himself is certainly capable of it."
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Schumacher, who retired in 2006 and then started his comeback last year, won five titles in a row with Ferrari during the Italian team's most dominant era from 2000 to 2004.
In Lauda's day, death was an ever present danger in Formula One and a driver could expect to attend numerous funerals of colleagues.
Lauda himself almost died in a fiery crash at the Nuerburgring in 1976 and went on to miss the title by a single point to Britain's James Hunt after refusing to race on in atrocious conditions at a rain-lashed Japanese Grand Prix.
Citing boredom at going around in circles, he then quit the sport for two years at the end of 1979 in search of new challenges in aviation.
The last driver fatality in Formula One was Brazilian triple champion Ayrton Senna in 1994 and Lauda doubted Vettel would be halted by either the 'fear factor' or any loss of enthusiasm.
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Instead, he expected him to have a long and brilliant career ahead.
"I spoke with Schumacher a couple of months ago," he said. "Like in our days, this danger discussion with yourself 'Do I want to take the chances even being 35 or 40?' - this doesn't apply today.
"Luckily enough the cars and the circuits are so improved that the drivers today do not have to question themselves about the risk like we had to do in the old days," he continued.
"This doesn't really come into it because they are used to these cars being safe and fit. They hit everything they can hit and nothing happens."
Vettel, Lauda said, had enough challenges ahead to keep him motivated for years to come.
"He is this kind of person, every lap he is doing and every race he is doing he wants to get quicker and quicker," the Austrian said.
"I came to a point where I really decided I wanted to find something else for my life. But in his particular case, with his age and what is all in front of him, there is no way he will be demotivated. He drives himself."