When you buy a new car, and often a used car, the dealer may try to sell you an extended warranty or a service contract to give you more protection than the manufacturer's warranty. The manufacturer's warranty usually covers the car for the first 12 months or 12,000 miles. Extended warranties and service contracts are not true warranties. They are repair or maintenance contracts that you have pay extra to get.
In deciding whether to pay for an extended warranty or service contract, you need to consider several things. You need to know exactly how much the contract will cost you. The selling price of service contracts varies from $100 or $200 up to $600 or $700. The total cost of the service contract usually includes a deductible amount that will not be covered. Some contracts require a deductible amount to be paid for every repair attempt. Others require the deductible to be paid for each unrelated repair.
Once you know the cost, you need to find out what the service contract covers. To make this determination you will need to check it against the manufacturer's warranty. Does it give more protection than the manufacturer's warranty? Does it give less protection that the manufacturer's warranty? Look at exactly what the service contract covers. Some service contracts only cover major parts like the engine and the power train. Very often small items such as gaskets and seals are excluded from the coverage. If they are excluded, you will want to know whether something like engine trouble will be covered if it is caused by a problem with the gaskets or seals.
Another thing you will need to consider is who is responsible for the repairs under the contract. Sometimes the service contract is administered by the manufacturer. If the manufacturer is responsible for covering the repairs under the warranty, you can generally rely on it having the money to meet the claims. However, many of the contracts are administered by independent service contract companies. The reliability of these companies varies. Some of these independent service contract companies can demonstrate financial responsibility to meet claims. Others may not be able to do so. At this time there are no registration requirements or financial responsibility requirements that must be met before service contracts can be sold. The best way to check on a particular company is to contact your local Better Business Bureau or to call the South Carolina Department of Consumer Affairs. The phone number for Consumer Affairs is 734-9452 in the Columbia area and 1-800-922-1594 from other parts of the state.
Another thing you need to consider is how the repairs are handled. How many places are authorized to make the repairs? Do you have to get permission before any repair work will be covered? Does the company administering the service contract have a toll-free number for you to call? You also need to consider how the repair bills are paid. Are the repair bills paid directly to the mechanic or do you have to pay the repair bills and request reimbursement?
If you travel, you will also need to consider whether the service contract provides you with an authorized repair place in another part of the state or in another state. Some service contract companies offer nationwide service, others do not.
If you have purchased an extended warranty or a service contract and have trouble getting the company to respond, you can file a complaint with the Better Business Bureau or with the Department of Consumer Affairs. These organizations may be able to help resolve your problems. If they cannot you may need to file a lawsuit in court. However, you do need to remember that the law concerning warranties does not apply to service contracts. The law concerning contracts will govern any such lawsuit.
This information was prepared to give you some general information on the law. It is not intended as legal advice about any particular problem. If you have questions about the law you should consult a lawyer. If you do not know a lawyer, you can call the South Carolina Bar Lawyer Referral Service weekdays between 9 a.m. and 5 p.m. The number is 799-7100 in Richland or Lexington Counties, and 1-800-868-2284 from other parts of the state.