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Service Contracts &
Extended Warranties
 Like a warranty, a service contract provides repair
and/or maintenance for a specific period. But warranties
are included in the price of a product, while service
contracts cost extra and are sold separately. To decide
if you need a service contract, consider whether:
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the service contract
duplicates warranty coverage or offers protection
that begins after the warranty runs out. Does the
service contract extend beyond the time you expect
to own the car? If so, is the service contract
transferable or is a shorter contract available?
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the vehicle is likely to
need repairs and their potential costs. You can
determine the value of a service contract by
figuring whether the cost of repairs is likely to
exceed the price of the contract.
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the service contract
covers all parts and systems. Check out all claims
carefully. For example, "bumper to bumper" coverage
may not mean what you think.
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a deductible is required
and, if so, the amount and terms.
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the contract covers
incidental expenses, such as towing and rental car
charges while your car is being serviced.
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repairs and routine
maintenance, such as oil changes, have to be done at
the dealer.
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there's a cancellation
and refund policy for the service contract and,
whether there are cancellation fees.
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the dealer or company
offering the service contract is reputable. Read the
contract carefully to determine who is legally
responsible for fulfilling the terms of the
contract. Some dealers sell third-party service
contracts.
The dealer must check the appropriate box on the Buyers
Guide if a service contract is offered, except in states
where service contracts are regulated by insurance laws.
If the Guide doesn't include a service contract
reference and you're interested in buying one, ask the
salesperson for more information.
If you buy a service contract from the dealer within 90
days of buying a used vehicle, federal law prohibits the
dealer from eliminating implied warranties on the
systems covered in the contract. For example, if you buy
a car "as is," the car normally is not covered by
implied warranties. But if you buy a service contract
covering the engine, you automatically get implied
warranties on the engine. These may give you protection
beyond the scope of the service contract. Make sure you
get written confirmation that your service
contract is in effect.
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