Service Contracts

	What Is a Service Contract?
	Decide If You Need a Service Contract
	Additional Information If Buying a Used Car
	What to Do If You Have a Problem with Your Service Contract

What Is a Service Contract?

Decide If You Need a Service Contract

The service contract may duplicate any warranty coverage or may offer protection once the warranty is finished. Before deciding to purchase a service contract, read it carefully and consider the following questions:

• What is the difference between the coverage under the warranty and the coverage under the service contract?
• How long does the warranty last? When does the service contract begin?
• What repairs are covered?
• Does the contract cover incidental expenses, such as towing and rental car charges while the car is being serviced?
• Is a deductible required, and if so, what is the amount and terms?
• Who pays for the labor? The parts? You or the service provider? Some dealers sell third-party contracts.
• Who performs the repairs? Can repairs be made elsewhere, or do you have to return to one service provider?
• Is the dealer or company offering the service contract reputable?
• Do you need prior authorization before repair work?
• Are repairs covered if your car breaks down while you are out of town?
• What is the cancellation and refund policy?
• Who backs the service contract, the dealer, the manufacturer or the independent company?
• What happens to your coverage if the dealer or administrator goes out of business?
• Does failure to keep up manufacturer's recommendations for routine maintenance void the service contract? Do these have to be done at the dealer?

Additional Information If Buying a Used Car

• 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 (see Warranties).

For more information on the Buyers Guide, see Used Car Buying.

You should not rely on spoken promises. They are difficult to enforce because there may not be any way for a court to determine with any confidence what was said. Get all promises in writing.

What to Do If You Have a Problem with Your Service Contract

If you have a problem that you think is covered by a service contract, follow the instructions to get service. If a dispute arises, there are several steps you can take:

• Try to work it out with the dealer. Talk with the salesperson or, if necessary, the owner of the dealership. Many problems can be resolved at this level. However, if you believe you're entitled to service, but the dealer disagrees, you can take other steps.
• If your warranty is backed by a car manufacturer, contact the local representative of the manufacturer. The local or zone representative is authorized to adjust and decide about warranty service and repairs to satisfy customers. Some manufacturers also are willing to repair certain problems in specific models for free, even if the manufacturer's warranty does not cover the problem. Ask the manufacturer's zone representative or the service department of a franchised dealership that sells your car model whether there is such a policy.
• Contact your local Better Business Bureau, state Attorney General, or your state Department of Motor Vehicles.
• You also might consider using a dispute resolution organization to arbitrate your disagreement if you and the dealer are willing. Under the terms of many warranties, this may be a required first step before you can sue the dealer or manufacturer. Check your warranty to see if this is the case. If you bought your car from a franchised dealer, you may be able to seek mediation through the Automotive Consumer Action Program (AUTOCAP), a dispute resolution program coordinated nationally by the National Automobile Dealers Association and sponsored through state and local dealer associations in many cities. Check with the dealer association in your area to see if they operate a mediation program.
• If none of these steps is successful, small claims court is an option. Here, you can resolve disputes involving small amounts of money, often without an attorney. The clerk of your local small claims court can tell you how to file a suit and what the dollar limit is in your state.
• The Magnuson-Moss Warranty Act also may be helpful. Under this federal law, you can sue based on breach of express warranties, implied warranties, or a service contract. If successful, consumers can recover reasonable attorneys' fees and other court costs. A lawyer can advise you if this law applies.

To learn more contact:

Consumer Response Center
Federal Trade Commission
Washington, D.C. 20580
Telephone: 202-326-2222
TDD: 202-326-2502