Consumer Protection
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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 "piece of mind" from repair hassles. It is estimated that 50% of new car buyers, and many used-car and major appliance buyers, purchase service contracts. Costs range from $50 to $500 or more depending upon the length 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.

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 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.

Is the Product Likely to Need Repairs?
You may not benefit from a service contract if the product is unlikely to need servicing 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. Some expenses are 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 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 Department of Insurance at (850) 922-3131 or (800) 342-2762 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. Consider waiting until your warranty period expires before you buy a service contract.

To File a Complaint.
If you believe that a company is not meeting its service contract obligations, you may wish to contact the following agencies to file a complaint. The Florida Department of Insurance may be reached at (850) 922-3131 or (800) 342-2762. You may also contact your local Better Business Bureau. You also may file a complaint with the FTC by writing to: Correspondence Branch, Federal Trade Commission, Washington, DC 20580. If the company is out-of-state, you may wish to call the appropriate agencies and authorities in the state where the company maintains its headquarters.

Additional Information.
For more information on service contracts and warranties, or to obtain a copy of BestSellers - a complete listing of all consumer publications from the FTC - contact: Public Reference, Federal Trade Commission, Washington, DC 20580; (202) 326- 2222. TDD (202) 326-2502.