Service Contracts for Cars 

Car manufacturers and dealers often offer service contracts. These are separate agreements you pay extra for. If your car has a warranty, the service contract may be unnecessary.  But if you buy a car “as is,” you may want to get a service contract. The service contract may give you implied warranties and help pay for repairs. Be sure to get a written confirmation that the service contract is in effect. 

Before paying for a service contract, make sure you understand all the terms. Besides the initial cost, you may have to pay a deductible each time you bring the car in for repairs or service. This means you will have to pay an initial amount before the service contract covers the rest. Also, there may be early termination or transfer fees if you sell the car or it gets stolen or totaled.  

Many service contracts also have exclusions. This means certain types of repairs or certain parts of the car that are not covered. You also may have to pay for labor in diagnosing a problem to see if the service contract covers it. Also, the service contract may not cover some parts or repairs, depending on how many miles are on the car. The service contract may require you to take the car only to certain locations for repairs. This could be a problem if you are traveling. The service contract may require you to do regularly-scheduled maintenance on the car. Otherwise, you may lose coverage under the service contract. 

Legal Editors: David Kassell, Esq. and Mark Grossman, Esq., May 2018