Consumer Protection

How to Protect Yourself: Service Contracts

Source: The Florida Attorney General's Office

If you are buying a car or major appliance, you may be offered a service contract. To many consumers, buying a service contract is like buying “peace of mind” from repair hassles. Some estimates state that approximately 40 percent of new car buyers, and many used-car and major appliance buyers, purchase service contracts. Costs can range from $50 to thousands of dollars or more depending upon the item being purchased, the length of coverage and amount of coverage provided. Before you buy a service contract, consider the following:

What does the service contract offer?

A service contract, like a warranty, provides repair and/or maintenance for a specific period of time. While warranties are included in the price of the product, service contracts cost extra and are sold separately. Remember that the purchase of a service agreement is not required in order to purchase or obtain financing for a motor vehicle.

What is covered by the service contract?

The service contract may only cover certain parts of the product or specific repairs. Read the contract carefully; if it does not list something as specifically covered, assume it is not. Repairs resulting from misuse or failure to properly maintain the product are usually not covered. Also, there may be certain pre-notice requirements which you must adhere to in order to have coverage under the service contract.

What does the service contract provide that the warranty does not?

Carefully compare the coverage of your warranty to the coverage offered by the service contract to decide if the service contract is worth the additional expense. New cars typically come with a manufacturer’s warranty, which usually offers coverage for at least three years or 36,000 miles. Depending upon the items covered in the warranty, a service contract might not provide additional benefits until after the warranty expires. Also consider the length of the service contract. If it is longer than the time period that you expect to own the car, then you may want to consider a shorter service contract or ask whether the service contract can be transferred when you sell the car.

Is the product likely to need repairs?

You may not benefit from a service contract if the product is unlikely to need servicing within the covered time period or if the estimated cost of repairs is minimal.

What other costs will you have?

Service contracts often have deductible amounts you are required to pay. Find out if the deductible is charged per visit or per repair. If it is per repair and you bring in your car to have three things fixed in one visit, you will have to pay a deductible for each repair. Some repair expenses may be limited or excluded. In addition, you may be required to pay cancellation or transfer fees if you sell the covered product or wish to end the contract.

Where can you get service?

If the service contract is offered through a local retailer or dealer, you may be limited to local service. If you move, or if you are traveling when your car breaks down, you may not be able to obtain service under the contract.

Who is responsible for the contract?

Consider whether the company is reputable, before you sign a contract. Investigate the company. Check with your local Better Business Bureau and the Florida Office of Insurance Regulation at 850-413-3140 or online at to determine whether any complaints have been filed against the company.

Can you purchase a service contract later?

You may be able to decide if you need a service contract after you have owned the product for some time. Whenever applicable, consider waiting until your warranty period expires before you buy a service contract.

File a complaint.

If you believe that a company is not meeting its service contract obligations, you may wish to file a complaint with the Florida Office of Insurance Regulation at 850-413-3140 or online at You may also file a complaint with the Florida Attorney General’s Office online at or by phone toll-free at 1-866-9-NO-SCAM.